I blog regularly that solution salespeople should defend their prices to the hilt in these credit crunch recession times and, in some cases, should even raise them.
So it was with untold delight that I came across the September 2008 musings of Accenture that not only shared my views, but also proposed additional actions along this theme. I thoroughly recommend reading the 3,000 web article, downloading the pdf, and moulding your selling process to adopt their relevant ideas wherever you can.
Yes, they are pushing an open door with me, but are you minded to share my stance? Here’s a few snippets to whet your appetite. Firstly, regarding why cutting prices is disastrous:
Impetuous price cuts across the board are almost always the wrong move
By cutting prices prematurely or in a reactive fashion, companies encourage customers to regard the depressed price as typical, which makes it very difficult to raise prices back to normal levels when the economy rebounds. The result is an almost permanent loss of profit margin
When managers overuse or misuse sales promotions, profitability suffers … those short-term volume increases do not offset the much lower selling price per unit, which depresses revenues and margins
These statements reminded me of a conversation I had with a Board member of a computer firm in 1988. Once you drop a price, it’s almost impossible to raise it once again afterwards, one reason being that a cut of 20% then requires a hike of 25% to get back to the previous level and customers refuse to acknowledge the greater percentage figure (slash by more and the subsequent rise gets ever more scarier, for instance a 30% reduction requires a later, almost unimaginable, increase of 43%).
So onto prescriptions. They propose five areas in which you can defend your price. Here’s a juicy morsel from each one:
Where in my product portfolio do I have a differentiated advantage? Which products will remain essential to customers throughout the downturn? Which ones will most easily lead to sales of other products?
some B2B sales efforts can be moved from promoting the discretionary features to emphasizing the fundamentals on products whose prices can likely be maintained
Pricing exemplars excel at focusing on the high-value customers that will sustain their profitability during the dark days, and then help them make gains in market share after the economy recovers.
price is not the be-all and end-all when customers are making their decisions
True deal discipline means a salesperson can’t go below a certain price range or change service features without special approval.