One of your sales reps is getting close to closing a deal when the prospect asks for a discount.
On one hand, you don’t want the rep to immediately offer a discount in order to close the deal. On the other hand, how do you defend saying “no” to a discount request made by a great new prospect in the sales process?
Arming reps with the right information and analytics is critical to sales effectiveness: It allows them to defend your pricing decisions and to compete on value, rather than price. In the end, the ability to analyze a deal effectively and get that information to the sales team can help you deliver an additional 100 to 200 margin basis points.
Here are three best practices for analyzing a deal:
1) Meaningful segmentation: Company size and geographical location are a start, but probably not the optimal segmentation attributes. Consider using a more advanced approach that evaluates a broader set of variables to produce a more refined customer segmentation. This type of segmentation enables you to compare the customer’s performance against a peer group in that segment and establish a good idea of each customer’s willingness to pay. Now you’re able to create a price recommendation based on data-driven insights.
From this position, reps are able to present a defensible price that meets the business goal without over-discounting. When a rep says, “This is the best price we’re able to offer you,” the rep is confident it’s in the customer’s ballpark, so they don’t have to give in to discount pressure.
2) Put your data to work: When your company offered a similar opportunity in the past, did you win or lose? At what price? Just like what you ask your financial advisor, ask how hard is my data working for me? Are you applying scientific analytics to your data to help create predictive and prescriptive insights? Using the data to clearly identify what pricing wins and doesn’t win results in a better understanding of price ranges reps can use for creating a winning offer for the customer or prospect.
3) Is price elasticity relevant: Customers and pricing analysts also look at price elasticity — the demand for a good or service relative to a change in the price of that good or service. The question you’re asking is, “If I lower the price, would it increase the deal size?”
Negotiated pricing in the B2B sales process may not be elastic. If the price doesn’t change the number of items your customer needs, the result is binary: you’re either going to win the business or not, rather than winning more or less of it. Your deal analysis needs to be based on insights into the buyer’s business and determine if price elasticity is relevant.
When you analyze a deal in terms of advanced customer segmentation, historical data and price elasticity relevance, it helps to arm your sales team, rein in out-of-control discounting and prevent pricing erosion. Going through these steps also increases the confidence of sales reps in the prices they offer customers and helps to maintain pricing discipline in your sales process.
The next time a customer asks a rep for a discount, you can be confident they will politely say “no” and defend your company’s data-driven pricing position.