Salespeople Negotiating - Caught in the Double Squeeze? (Part 2 of 2)
At the end of our last blog, we had a situation where the salesperson was feeling pressures from both sides: the company saying, “Make the sale! Make the sale!” and the customer saying, “The only way you’re going to make the sale is to drop the price!” with the fairly predictable outcome of the salesperson dropping the price to get the sale.
So what to do? Here’s a start:
Teach the salespeople how to handle a price pressure situation. After all, it’s not as if they were being caught off guard. Every customer your sales team faces has pretty much the same language—uses pretty much the same pressure. They all want more for less; they all want a lower price; they all want shorter delivery times; they all want free this and discounted that . . . Well, you get the idea.
So here are two steps to get out of this situation:
1.Teach your sales team how to respond in ways that achieve the desired outcomes.
Your sales pros shouldn’t have to wing it—they need to be trained. When the likely scenarios come up, they have to know what to do and how to do it. And when they’re being trained, don’t lose sight of the fact that the study of negotiation is more akin to golf or martial arts than anything else: getting good requires a lot of practice. And it’s your job to make sure they’re not only practicing, but practicing the right things. They need to be aware of how to respond to those situations, and they have to practice those responses until it’s all second nature. Remember Mr. Miyagi in The Karate Kid? “Wax on, wax off”—he was a pretty smart guy. He knew that in the heat of battle, those moves had to be reflex. Here on our website you'll find articles and videos on how to respond to price situations.
2.Reward what you want done.
If your compensation plan rewards gross sales—total dollar volume—don’t be surprised when that’s exactly what you get. If your compensation plan rewards margins, then guess what: you’ll get better margins.
Salespeople are smart—they’ll follow the money every time. Be sure your comp package reflects specifically what you want to happen because what it rewards is what will happen!
Implement these two areas, and you can keep the “double squeeze”—pressures from the customer and pressures from the company—from squeezing profits and performance. Educate your team! Train your people on how to respond to price pressures, and be sure the compensation system matches what you want to happen.
When you do that, you’ll be handling at least the inside part of the problem. Sometimes we can’t change customers, but we can always change ourselves. When you do, you’ll see changes—big changes—and you will have eliminated at least half the price-cutting battle.