(843 words - 7 min) Your salespeople discount too much. They want the sale. They often want the sale at any cost, including the cost to your bottom line. When you talk with them, they claim to do what’s best for your company, but you don’t really believe that. The vast majority of salespeople are not indifferent, incompetent or lazy. Yet they discount too much. Why? Discounting is a tool in their toolbox. Sadly, it’s very easy to use, so it frequently gets used. Salespeople want to please the prospect. They want to be liked. They want to earn trust ...
(882 words - 7 min) Every purchase has one thing in common: A potential buyer looks at the price of a product and compares it to the value they expect to receive. If the prospective consumer doesn’t make the purchase, it’s for one of two reasons: Either the price was too high, or they didn’t perceive enough value. You can probably lower your price enough to get them to purchase — but that’s not why you’re in business or in sales. The key to sales is to help the buyer perceive more value in your product. Ultimately, the most successful salespeople ...
(677 words - 5 min) Pricing, like many fields, is both a science and an art. Many pricing professionals focus on the science side using spreadsheets, big data, data science and market research techniques. We tend to love facts, math and numbers. The science of pricing comes relatively easily to us. The art of pricing is different. Now we must think differently, as there is more to pricing than just numbers. Let’s split the art of pricing into two parts: the tools and the vision. Like a painter must choose which tools and techniques to use, a pricing professional must ...
(889 words - 7 min) The most common sales compensation is a base pay plus a commission rate as a percentage of the revenue. The base is justified as payment for activities the company wants them to perform that take them away from selling. These are activities like forecasting, training someone new or working with engineering on a new product. The exciting part of the compensation plan is the commission. For example, if a salesperson makes a 4% commission, then when he sells $1 million worth of products, he earns $40,000. This seems like a good plan to motivate salespeople to sell ...
(776 words - 6 min) Growing a traditional or transactional business may not have been easy, but it was easy to understand. Create great products. Use marketing to get the word out. Hire salespeople to close deals. The better you do each of these three activities, the more revenue you will make. Let’s call these actions part of the 'win,' for winning new customers. Subscription businesses must also win customers, and the process is essentially identical. But this is only the first of three revenue buckets a subscription company must manage, especially if they want to grow. The three revenue buckets ...
(976 words - 8 min) Value-based pricing is an extremely simple concept: Charge what your customers are willing to pay. This is the perfect profit optimizing price. Charge more than that, and they won’t buy. Charge less, and you’re leaving money on the table. You can’t do better. This concept is simple to understand but impossible to do perfectly — you can’t read the minds of your buyers. Besides, they probably don’t even know exactly how much they would pay. However, you can always get closer. There are many strategies and tactics you can implement to capture more of your ...
(842 words - 7 min) How do buyers choose what to buy? A purchase decision can be broken up into two processes, rational and irrational. Dan Ariely’s book, Predictably Irrational, did a wonderful job of explaining how humans use heuristics or mental shortcuts instead of pure logic to make decisions. This field of behavioral economics is fascinating and fun, but it only describes a portion of a buyer's decision process. Buyers buy value. They only have so much money, so they choose carefully how to spend it. Sure, they make mistakes, but they try not to. They try to be rational ...