A sales rep’s mind can be their worst enemy when it comes to pricing initiatives. You have probably heard the comments in the hall-way and board rooms. “We don’t have good products/solutions to command those types of prices”. “My customer told me they do not have budget”. “This sounds like a one size fits all approach”. My favorite, “We will lose this customer if we ask for another price increase”. Too many B2B companies today fail to activate pricing initiatives because they don’t focus on overcoming resistance from the sales team. As a CEO, you should care since many times this a critical growth lever.
Why You Should Care?
Think about the time money and resources spent on developing a pricing strategy. If done right, you probably conducted an exercise around segmentation in the markets where you can develop and exercise pricing power. Then you turned your attention to competitive positioning and how to influence buyer perception. You then focused on pricing structure, price lists, etc. With all the design and planning complete, I am still amazed how little effort is put on pricing execution.
This post focuses on how to overcome sales team resistance to pricing initiatives. The key stakeholder in pricing execution is the sales organization. Without them your initiatives are doomed to fail. On the flip side a focused, confident, and well-enabled sales organization can make 2-5 percent impact on revenue growth. Many times, this lift goes straight to the bottom line.
You can also download the SBI Pricing Execution Guidance Tool as an assessment to predict your organization’s pricing power.
What Does Great Look Like?
So how do world class organization activate pricing power? Below I have summarized the 5 key areas that will help you create focus.
- Co-create: In order to institute a value-based approach to pricing you must understand the customers purchasing criteria. You would gather this information as part of your segmentation through a series of customer interviews. There are two main benefits from including sales early in the process. Including your top sales people in the process helps validate and reinforce your learning. Secondly, these same folks will help socialize and drive adoption for your pricing initiative.
- Inform: I often see managers and sales reps make broad pricing decisions. The result is pricing your products/solutions too low and leaving money on the table or price too high and lose customers. The pricing team needs to provide critical data to help sales make better pricing decisions. What does critical data mean? Understand product/solution profitability across markets and segments. Without this data pricing decisions will continue to be a gut feel.
- Enable: Resistance usually comes from a place of doubt and fear. As opposed to confidence built from knowledge and having proficiency across a skill. You in order to build a sales organization that is confident in your pricing initiative you must equip them with the knowledge, skills and tools to get the job done. Below are a few examples.
- Knowledge: Price levels, discounting guidelines, value messaging, compensation across a seller’s segments and accounts.
- Skills: Training, real scenario roles play, use cases, certification, ongoing training
- Tools: Playbooks, target pricing tool, ROI Calculator, business case, etc. read this article from my colleague Dan Bernoske titled, “Close More Deals With This Pricing Strategy”. In the article you will find a Solutions Options Tool which teaches how to price effectively.
- Measure: In order to sustain momentum, it is important to implement the right incentives and KPIs. KPIs should tie back to corporate objectives and ensure they are the same across functions. Incentives should tie back to the right behavioral, leading and lagging indicators while being stage appropriate.
- Communicate: Lastly, Executive leadership most exhibit visible leadership. Active communication across success stories, customer value creation, KPI progress/trends ensure alignment across the organization. It follows the adage “If my boss cares about it, then I care about it”.
In order to outpace the market and your competitors you need to exercise pricing power. This cannot happen without proper pricing execution. You cannot simply blame competitors and customers for poor pricing performance. Turn your focus to the sales organization and the performance conditions that build confidence and skill.
Start by using the SBI Pricing Execution Guidance Tool. This is not a quick fix, it’s a journey and takes continuous improvement.
What Should You Do Next?
SBI has also made it easy to assess your pricing strategy.
- Complete the Pricing Strategy Diagnostic which will enable you to self-assess gaps and opportunities within your organization. You will receive your custom report highlighting immediate opportunities.
- Review the diagnostic results with your leadership team and address gaps utilizing the SBI workbook, pages 144-230 in Revenue Growth Methodology.
- Invite an SBI pricing strategy expert to visit your company for a complimentary workshop where we will review your results together.
Schedule a working session at SBI’s Studio.
Located in Dallas, TX, our facility offers state-of-the-art meeting rooms, lounge, full-service bar, and a studio used to tape our TV shows. SBI provides the location and facilitators, all at a compelling price point.
As a guest of The Studio, you’ll get unlimited access to SBI’s CEO, Partners, and a handpicked team of experts.