Some time ago, I had the privilege of interviewing Mark Hunter (TheSalesHunter.com) for a podcast episode. I’ve been reading Mark’s blogs and books for a long time. He’s a sales trainer who really gets pricing.
In our interview, Mark said something I hadn’t heard him or any other sales leader say before.
“Don’t give any discount authority to sales.”
Wow. My jaw dropped. The concept is phenomenal, but is it real?
From a pricing person’s perspective, I’ve always believed I shouldn’t try to tell sales teams they had no authority to discount their products and pricing. I was pretty sure they’d push back. In fact, there are some logical reasons to give salespeople discount authority.
It speeds up the sales cycle. If the end result will be a discount to the customer, it’s a waste of time to have salespeople escalate an opportunity to the company, when you know the discount will be approved anyway. It’s even possible that slowing down the response time to the customer risks losing the deal.
One could argue salespeople have a much better understanding of any specific buyer’s willingness to pay. In that case, price decisions should be made by the people with the best information.
Yet Mark’s idea is incredible if you can implement it. Think of a salesperson as having a bag of tools to pull out to get the job done. Many of those tools communicate value to the buyer. What’s great is both the buyer and the salesperson want there to be more value. But there is one tool, price, where the salesperson and the buyer are at odds. Yet the salesperson wants to close the deal. There is this conflict over price. By using the price tool, the salesperson reduces some conflict and may close the deal, but did he have to?
If you price your products fairly with respect to the amount of value your customers will receive, then lowering price was simply reducing profit. What would a salesperson do if he didn’t have the price tool available to him? He would sell value. The customer would ask for a lower price and the salesperson would point out that the value far exceeds the asking price.
The point is, if you give a salesperson a tool, expect him to use it. This is not saying anything bad about salespeople. They are using whatever tools they have to close deals. However, if they don’t have the price tool, they will still close deals.
I’d love to hear from anyone who has taken discount authority away from salespeople. What happened? Did sales object vigorously? Did you track average selling price? Sales cycle?