We often hear from clients that pricing differences across their client base are crippling their ability to scale and truly operationalize their business.
It starts with a one-off that a client asks for. This is usually accommodated to close the deal, and quickly turns into much more than just an anomaly; it turns into a sales habit – developing unique pricing structures, terms, rates and payment schedules.
How can you make sure you are accommodating, while setting yourself up for long-term scalability?
The answer – standardized processes supported by customized solutions.
Leverage our Pricing Enhanced Persona Tool for help with:
- Breaking out clients into segments
- Vetting out why they value your offering versus another firm’s
- Stepping through a framework evaluating your Customer Acquisition Costs when matched up to the Lifetime Value they would bring to your firm.
What is Your Optimal Mix of Flexibility and Structure?
Focus on what matters.
First, evaluate your cost to sell and service drivers. Understand how and where you make money and the flexibility that you have. This would include inventorying items you control ((salaries, bonuses) and things you have very little control over (price of transportation, price of your raw materials. For software firms, it is likely to be focused around your people – salaries, levels of support provided and hardware / software. We view research and development and general overhead more as items for the enterprise that are more fixed versus tied to a client. For manufacturing firms, much of your costs is going to be around raw materials, shipping and maintenance of your facilities.
Second, evaluate what is important to your buyer. Are they buying from you based on price, quantity, time to receive, cost savings impacts, etc. It’s the items you provide that get you on the prospect’s short list of vendors that then lead to discussions around why you and why now is the right time.
Use the intersection of both of these to design a program that offers flexibility around criteria that is important to your prospect or client. Have baseline standards and incent your sales people to do what is best for the firm. When discounts are warranted, have an escalation process built in to allow for this to be accomplished. Use your CRM to structure these escalations (why, what will it bring to the firm, etc.) and review the metrics of these on a quarterly basis.
It is important to take the time to list these out on paper with your sales team – make them a part of the process in person or virtually. Providing that clarity to all of why people buy from you and how you make money (or lose money on poorly negotiated contracts).
Reiterate Your Priorities: Measure, Monitor and Publish
Now that you have established a process that allows for success – structure with flexibility – what else should you do.?
Be intentional about the metrics you gather, review and publish. We have seen firms have great success in driving behavior changes by merely publishing metrics. Your people will react and will do things that allow them to maximize their personal rankings on the metrics that you publish. Some metrics you might consider by sales rep, sales manager and territory:
- Bookings / Sales: bookings, # of deals, average discount by product, etc.
- Coverage: average # of products per client, feature versus packaged discounts, most sold vs. least sold items, etc.
For leadership, review the metrics as a time series. If you start to see trends (e.g. we are consistently giving a discount on a feature, a particular region is having great success or challenges in selling a particular product, etc.) use this as information to determine if you need to adjust your pricing, train an deploy best practices, etc.
As costs evolve as they inherently will over time and at different rates, evaluate how that changes your business model – your current clients as well as those that are in your sales pipeline.
Know Your Prospects & Clients
We have developed a Pricing Enhanced Persona Tool that helps:
- Break out clients into segments
- Vet out why they value your offering versus another firm’s
- Step through a framework evaluating your Customer Acquisition Costs when matched up to the Lifetime Value they would bring to your firm.
As you think about how you price, what matters, etc. as inputs into your sales process, benefit by walking through this baseline model.
Closing Thoughts: Simplify
Make your life more simple in just 2 years – setup your sales structures today with guidelines and boundaries on where your sales representatives can take prospects.
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