Who’s to blame for discounts: managers or salespeople?
Too many sellers inadvertently train their customers to always expect a discount. And the finger of blame for this is invariably pointed at the sales rep.
It certainly is easy to blame the salespeople for rampant discounting. They seem like the obvious culprit. But it has been my experience that the responsibility for over-zealous discounting, and the resultant price and margin erosion, primarily rests with management.
The easiest way to look at this issue is to think of it as a problem of surplus. What happens when a manager is confronted with a surplus of inventory sitting unsold on their shelves? The knee-jerk reaction is to resort to “sales” or “special incentives” to move the product.
Similarly, when a manager has a surplus of salespeople who are not hitting their numbers (which means that the manager isn’t hitting her or his number either and their bonus is at risk) the first resort for many managers is to authorize their salespeople to offer a discount to a customer to help accelerate the close and win the order.
All parties involved in a sales transaction, buyer and seller, are familiar with this cause and effect scenario. Salespeople wait for it. If they are in a tough competitive situation and unable to sell on value, sales reps will default to a price sale by telling prospects that if they wait until the end of the month, they can get them a better deal on pricing.
And, your customers wait for it because you, via your sales team, have trained them to expect a discount in return for orders placed at the end of a month or quarter. It is not an accident that the trajectory of orders during a quarter often trace the familiar hockey stick shape. It’s because sellers and buyers alike are familiar with the rules and are in on the game together.
The problem with this end of period discounting is that these “one-time” discounts often morph into the new default price point for your customer. If you’re handing out discounts at the end of a quarter like Halloween candy to induce customers to close an order or accelerate a delivery, then there is a very high probability that your next order from that customer is going to be at the new lower price point you just established with the discount.
Try telling a customer that you only gave them a discount in order to get their before the end of the month or quarter and you’ll soon find that all your orders from that customer will only materialize at the end of your month or quarter.
As a manager, to effectively address this discounting problem you need to develop a plan to reduce these surplus factors in your selling. That starts with consistently working with and educating your sales team to improve their skills and capacity for selling value.
Commit to Consistent Product & Customer Training
Learning to sell value is next to impossible unless a sales rep possesses a true understanding of your product and service and how customers derive value from using them. Does your current training accomplish that?
Here are a few recommendations for your training program:
1. Set aside at least 20 minutes in every sales meeting for product & customer training. Don’t waver from this. It will take some preparation on your end but you can’t let that deter you from making training a regular feature of your sales meetings.
2. Invite internal product experts to be your faculty. Don’t attempt to teach this yourself. Use the experts from within your company to teach your team. They have more knowledge and credibility than you do.
3. Have your customers participate. Invite one customer per month to join a sales meeting via Skype and let your sales team interview them. Have your salespeople ask the customer questions about why they chose your product, how they are using it and the value they are receiving from using it.
4. Continually test. Don’t wait until you turn your salespeople loose on the customers to find out if they are learning from the training. Test their knowledge after every training session.
Value Planning for Sales Interactions
Along with training, as a manager you also have to make sure that every sales touch your sales team executes is planned to deliver maximum value to the prospect. Salespeople can’t operate on autopilot. Every sales interaction needs to be planned.
This means that every customer interaction needs a goal and a planned outcome. The goal must be defined in terms of the value that will be delivered to the prospect and the planned outcome is the next step(s) the prospect will take as a result of receiving the value. The value to be delivered will be in the form of information, insights, questions, context and data that helps the prospect move at least one step closer to making a decision.
Lastly, it is not enough to train sales people to become better value sellers if you, as the manager, do not change your own behaviors. In addition to helping your salespeople become more effective value sellers, you need to break their discounting habit.
Unfortunately, going cold-turkey is the only effective method to curtail the practice. It may take one or two challenging months to flush the temptation out of your system and re-train your salespeople, prospects and customers. However, you will learn which customers are buying your product for the value versus the discount. These are the customers on which you’ll want to focus going forward.