Pricing your product properly is always a contentious issue for our sales training clients in Vancouver, Edmonton, Calgary and Toronto.   Management tends to favor the side of charging full value and avoid giving concessions while Salespeople never like to lose a deal over price. How do you thread the needle and know exactly where your pricing structure should be?  Here’s the leading indicator that is easy to understand and simple to use.

The Management Perspective

Management represents the best interests of the company.  Smart Sales Managers are also in tune with the needs of their Salespeople.  They want them to be productive and committed to driving revenue.  A large part of having the required passion and conviction as a Salesperson is being happy.  That holds for all employees.

I have been fortunate to spend my sales career with leading industry companies where the bulk of Salespeople had no desire to leave.  Of course, they didn’t agree with all Management decisions.  No one ever expected them to do so.  Yet, they had the faith in their company to go out every day and do their best to convince decision makers to part with their money.

A strong, stable Sales Team with low employee turnover drives sales.   Salespeople who like and respect their Manager and company drive sales.  Decision makers like to invest in companies that they feel good about.

Market leaders in every business category don’t have the reputation of dropping price on a regular basis.  That’s what their competitors do to steal business.  This is the primary reason Management will hold price and avoid discounting.

Where Commissioned Salespeople Stand

Good Salespeople work hard to earn the business they win.  Top-producing Salespeople are intrapreneurs within the company they represent.  They think like entrepreneurs, yet chose a more consistent career and steady paycheck.  Commissions earned by Salespeople earn can easily influence their decision in the debate on pricing.  After all, a client who walks away on price was usually more challenging to get to the bargaining table than one that is convinced of a fair deal.

It can be extremely discouraging to lose a large deal with a decision maker with a long sales cycle – especially so, if the Salesperson’s pay is largely made from commission.  Every one of us has had this experience many times over.  It comes with the job.

I will also add that some of the best Salespeople I’ve worked with were vigilant on price.  They had little interest in dealing with a customer who wanted to steal the product.  They would even plant those negotiating seeds very early in the relationship under the philosophy of lose fast and win slow with the right clients.

Supply and Demand – The Ruling Factor

In every industry, this is a basic economic principle.  For the most part, low supply of product combined with high demand  increases price.  The opposite tends to hold true, as the greater the supply and the lower the demand, the lower the price falls.  These two forces pull against each other to find a fair balance between the two.

While supply and demand is the natural way of setting your pricing structure, here’s another way that brings more clarity to the pricing issue.

How to Price Your Product Properly

Ask yourself this question.  When is the last time you lost a deal because your rates were too high?  Despite the efforts made by you to sell the benefits of your offer and show true value, the decision maker went elsewhere because he or she simply couldn’t justify your pricing.

If this seldom happens, your pricing model is too low – no matter what you’re charging.  That’s because you’re not pushing the issue hard enough.  Let’s take that one step further and quantify it.

If you aren’t currently losing at least one of ten deals due to high pricing, you aren’t maximizing your opportunities.  Here’s why.

The other nine out of 10 make up for the one you lost many times over.  The lost business from the one buyer who thought your prices were unreasonable compared to the combined purchasing power of the remaining nine is a sacrifice that draws a clear line between supply and demand.

Fight the conventional sales philosophy

This will be a challenge.  We all know that no one likes to lose a deal over price.  Perhaps we should change that way of thinking to a more progressive philosophy.

When we lose 10% of our opportunities due to price, we know that we have reached a fair balance between supply and demand.

What do you think?  Please use the comments section below and share your true feelings.  Let’s get well rounded opinions from Owners, Managers and Salespeople.  If you liked this post, please share it on your favorite social media platform.
PROSALESGUY Online Sales TrainingPricing is a component of our online sales training program, The Sales Skills Incubator.  Click the link for a free sample of Chapter #8 – The 10 Most Common Mistakes Salespeople Make.

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Dave Warawa – PROSALESGUY 

Author of SHUT UP!  Stop Talking and Start Making Money available on and in paperback and kindle