Remarkable things happen when you refuse to discount

Question and Answer for Sales People

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By Dave Kahle

Q. Customers ask every year at “budget” time for us (as their main distributor) to give them a better discount. Will this ever stop?

A. No.

Q. How can we continue to grow when we keep giving away margin?

A. Let’s think about this one together.

If your margins are greater than the average in your industry, and you are a well managed company, you could probably give away some of that margin to your customers without any severe repercussions to the company.

If that’s not the case, then the answer is obvious. You can’t subsidize your customer’s business – at least not many of them. You must make a profit, and you must make a pretty significant profit if you want to fund your growth out of the cash flow from your operations.

I suspect, in this case, that you are giving away margin to keep the business. If your margins are excessive, you can probably do this for a while. But there is a point at which any further degradation of the margin means that you are servicing this account unprofitably. There may be strategic reasons to do so, but from a purely economic point of view, you can’t do that very often or for very long. Either one of those choices will result in the early demise of your company.

So the answer to your question is, “You won’t for very long.” But that’s not the real issue.
The real issue is “Why are you giving away margin?”

The answer says more about you than it does the customer. Customers will continually ask for lower prices, because that’s their job. But just because they ask doesn’t mean that you have to give in. While there may be times and places when reducing your margin may be a wise thing to do, generally speaking, it’s not recommended. Here’s why:

1. When you discount your margins, you train the customer to continually ask for bigger discounts. Your customer thinks, “If it worked this time, why won’t it work again?”

2. When you discount your margins, you train the customer that your prices are negotiable, and that your stated price is not your real price. So, again, you train the customer to continually ask for discounts.

3. When you discount your margins, you send a message that your company really does not add any value to the equation, and you sink to the level of the low-price competitors.
On the other hand, when you refuse to discount, you:

1. Send the message that your price is fair for the value that the customer receives.

2. Send the message that your prices are not negotiable.

3. Send the message that there is integrity in your pricing and in your business.

When it comes down to it, the real reason that you are giving away margin is that you are afraid to lose the business to a lower priced competitor if you don’t. That’s a fear that you must face if you are going to be successful in the long term. Until you get over that fear, you’ll forever be at the mercy of the discount-demanding customers.

There are worse things than losing a piece of business to a low priced competitor.

Refuse to discount, and walk away from the business if you have to. In the long run, you’ll be more confident, you’ll have a greater personal presence, and you’ll reduce the incessant clamoring for discounts. If the customer moves to someone else, they may come back to you if the competitor messes up. And, it’ll free your time to invest in customers who are not so price conscious.

Copyright MMX by Dave Kahle

All Rights Reserved
About the author:

Dave Kahle is one of the world’s leading sales authorities. He’s written twelve books, presented in 47 states and ten countries, and has helped enrich tens of thousands of sales people and transform hundreds of sales organizations. Sign up for his free weekly Ezine. Check out our Sales Resource Center for 455 sales training programs for every sales person at every level.

You may contact Dave at 800-331-1287, or dave@davekahle.com.

Photo Credit: pakorn/freedigitalphotos.net

Be ready to provide information to your customers

Best Practice # 42: Has a systematic approach to collecting, processing, storing and accessing information about their products and services.

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By Dave Kahle

Sometimes I am almost embarrassed to have to actually spend time describing some of these best practices. There are some that seem so blatantly obvious, so basic, that there can’t possibly be salespeople who don’t do them.

Alas, no matter how basic and fundamental a best practice may sound, there are good numbers of salespeople who just don’t implement that practice well. They may agree on the concept, and give lip service to the idea, but they just don’t find themselves practicing that procedure with any discipline.

That’s why the best practices are called best practices. You have to do them. It’s one thing to acknowledge their value and expediency; it’s quite another to routinely execute them with excellence.

This one falls into that category. Could there possibly be a salesperson who doesn’t have all the literature for every product or service he sells — the specifications, the efficacy studies, the price and packaging – organized so he can easily find it and retrieve it?

More than you would think.

As a result, they look unprepared and unorganized in front of the customer, waste time looking for things they should have, and miss opportunities due to a lack of readily available information.

The best salespeople understand the need to be organized, and specifically to have their product and service information and literature readily available. They understand that this means both hard copy and electronic files, organized in some logical and coherent fashion, kept up to date, and readily assessable whenever they need it. That typically takes the form of a file box in their car for the hard copy literature, and a set of files on their laptop for the electronic.

That way, they can easily and quickly produce the information that their customers require. They save the customer time, appear professional and organized, and turn opportunities into dollars.

That’s why they are the best, and this is a practice of the best.

Photo: stockimages/freedigitalphotos.net

Commence CRM – Salesforce.com Alternative

Commence Corporation manufacturer of Commence CRM, has emerged as a high quality alternative to higher cost CRM solutions like Salesforce.com. The company has specifically targeted small to mid-size businesses that require more functionality and flexibility than traditional low cost CRM solutions can offer. Commence has become popular in companies of 10 to 100 users and has created a nice niche in the CRM sector.

“You can’t be all things to all people,” says Todd Pape, Chief Technology Officer at Commence. Pape ought to know, he has been part of the company’s engineering team for two decades. “Designing software solutions that support a few hundred users is very different than creating a system that can support a few thousand,” says Pape. “Enterprise CRM solutions like Salesforce.com, Oracle CRM, or SAP have complex architectures that are designed to perform well with high transaction volumes and extremely large data sets. These solutions also offer a level of functionality and administration that far exceeds that required by small to mid-size organizations. They are also by their own enterprise design more difficult to implement, more costly and harder to use.”

“While Oracle and SAP have focused their energy in the enterprise sector, Salesforce.com is trying to drive their solution into the small to mid-size community. Their approach to attracting these businesses has been to create separate product editions where they remove core functionality and lower the cost. I suspect this is because they realize that small businesses are more price sensitive than larger organizations. The challenge they face however, is that you cannot change the complexity of a solution designed for the enterprise market by simply removing functionality and lowering the price. What you are left with is a product that is still hard to use, costly to implement and offers no more functionality than competitive products like Commence CRM. We know this simply due to the number of inquiries we get from customers who have discontinued their annual agreement with Salesforce and are seeking an easier to use, less expensive alternative. This is not to say that Salesforce is not a good product,” continued Pape. “It is and as a chief engineer what they have achieved in the enterprise sector is admirable, but this does not make Salesforce.com the best solution for smaller businesses.”

“Small to mid-size firms worry about a product’s adoption and ease of use, and the total cost of ownership. This makes products like Salesforce.com a harder sell in this sector, particularly when there are several very good, lower cost, easier to use solutions like Commence CRM. It is hard to be all things to all people. No one that I am aware of has achieved this,” says Pape “not even Salesforce.com.”