This is a very pertinent question. I have assessed many businesses over the years who have a pricing policy decided ultimately by the salesperson.
Often there will be a cost or trade price with the salesperson receiving a percentage of the profit between the trade price and the sale price and this can prove highly successful.
It can also be problematic as many salespeople are inherently selfish and will often adapt any proposal to suit their needs rather that of the customer or their employer.
So how do you manage pricing within your business? How do you ensure your customers are getting value whilst still allowing your business to make a profit and keep your salespeople well rewarded? In truth it is very hard as there are so many moving parts to keep well-tuned. What you may regard as a fair price for your product could be deemed to be expensive by a competitor who has a differing business model. Offering a very low price will affect your profit and probably the commission of the salesperson too.
It all ultimately comes down to the overall objectives of your business and what you are looking to achieve. I have operated a few schemes whereby the customer gets a good deal and the salesperson gets the lions share of any profit and I gain the benefits of the ongoing business. This has always worked well for me as my previous businesses were generally centred around long term sale value rather than a need for a large trading profit. These schemes allowed me to reward salespeople at a level that few others could match and our customers got a good deal - and my client base grew quickly.
Salespeople will always need some degree of flexibility of pricing as giving a discount or doing a deal is a fundamental part of the sales process. By not providing the salesperson with a discount tool in their kit is like asking an artist to paint without a brush.
There are a lot of businesses who apply a simple markup over the cost price - this is very common in retail and low-margin, high volume businesses. On the whole these do prove successful but can also be very predictable for competitors who know they will be competing against you for your business - a big problem for standard B2B sales in a localised environment.
If your business has a need to issue a price list to clients or on its website then it becomes essential that you have a robust and regularly researched pricing policy as comparisons become very easy and you will often have no human interaction to justify or explain your pricing.
It is important to remember that pricing is not everything. I have had clients historically who have proved very profitable for me and pay a high price for my products and services but they get what they need. It may be they needed me to be on call 24/7 during the rollout of a project or that they needed full time project management or for me to be able to drop everything during a key phase and produce some advice at 3am on a Sunday morning. My clients understand that they are paying a premium for me if they need me to be available for them regardless of the time of day and we all regard this as being completely fair.
For me as a business owner it is important that everyone feels they are getting a fair price. The customer must not feel they have been charges excessively, the salesperson must feel well rewarded and I must feel that I am doing something worthwhile. There is little benefit for anyone involved if either party in a transaction is resentful of the price paid.
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It can also be problematic as many salespeople are inherently selfish and will often adapt any proposal to suit their needs rather that of the customer or their employer.
So how do you manage pricing within your business? How do you ensure your customers are getting value whilst still allowing your business to make a profit and keep your salespeople well rewarded? In truth it is very hard as there are so many moving parts to keep well-tuned. What you may regard as a fair price for your product could be deemed to be expensive by a competitor who has a differing business model. Offering a very low price will affect your profit and probably the commission of the salesperson too.
It all ultimately comes down to the overall objectives of your business and what you are looking to achieve. I have operated a few schemes whereby the customer gets a good deal and the salesperson gets the lions share of any profit and I gain the benefits of the ongoing business. This has always worked well for me as my previous businesses were generally centred around long term sale value rather than a need for a large trading profit. These schemes allowed me to reward salespeople at a level that few others could match and our customers got a good deal - and my client base grew quickly.
Salespeople will always need some degree of flexibility of pricing as giving a discount or doing a deal is a fundamental part of the sales process. By not providing the salesperson with a discount tool in their kit is like asking an artist to paint without a brush.
There are a lot of businesses who apply a simple markup over the cost price - this is very common in retail and low-margin, high volume businesses. On the whole these do prove successful but can also be very predictable for competitors who know they will be competing against you for your business - a big problem for standard B2B sales in a localised environment.
If your business has a need to issue a price list to clients or on its website then it becomes essential that you have a robust and regularly researched pricing policy as comparisons become very easy and you will often have no human interaction to justify or explain your pricing.
It is important to remember that pricing is not everything. I have had clients historically who have proved very profitable for me and pay a high price for my products and services but they get what they need. It may be they needed me to be on call 24/7 during the rollout of a project or that they needed full time project management or for me to be able to drop everything during a key phase and produce some advice at 3am on a Sunday morning. My clients understand that they are paying a premium for me if they need me to be available for them regardless of the time of day and we all regard this as being completely fair.
For me as a business owner it is important that everyone feels they are getting a fair price. The customer must not feel they have been charges excessively, the salesperson must feel well rewarded and I must feel that I am doing something worthwhile. There is little benefit for anyone involved if either party in a transaction is resentful of the price paid.
Please follow us on Twitter @salesfrienduk, subscribe to us, like us, follow us, share us and comment.
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