Sales and pricing teams are sometimes at odds with each other. Sales teams feel that pricers don’t understand the nuances of their deals and pricing teams feel like salespeople are always quick to discount a deal just to get the sale! In this coffee chat episode, we look at some of the biggest challenges that divide sales and pricing teams and provide advice on how these important functions can work better together to accelerate sales cycles and deliver deals that are both a win for the buyer and the business.
[01:01]: Pricing teams don’t really understand the nuances of my deal
[02:58]: Sales teams are too eager to discount deals just to get it signed
[04:47]: The first price provided is always too high
[07:25]: Salespeople don’t sell on value, they only sell on price
[09:45]: Pricing teams are too focused on the short term instead of seeing the long term opportunities with the buyer
[11:15]: Sales teams always price off of gut instinct
Loretta Faluade: Welcome to Coffee Chats with the PROS. My name is Loretta Faluade, and I'm a solution strategy director. Today, we've got a really special episode for you guys. I have special guest, Valerie Howard, who's actually one of my good friends at PROS, and she's also a solution strategy director. Welcome, Valerie....
Loretta Faluade: Welcome to Coffee Chats with the PROS. My name is Loretta Faluade, and I'm a solution strategy director. Today, we've got a really special episode for you guys. I have special guest, Valerie Howard, who's actually one of my good friends at PROS, and she's also a solution strategy director. Welcome, Valerie.
Valerie Howard: Thanks so much, Loretta. It's nice to be here with you in your home. Thank you for inviting me.
Loretta Faluade: Absolutely. We want to have a conversation today around sales and pricing, and really breaking down the walls that divide us.
Loretta Faluade: I actually came from a sales background where I worked in a sales team. I was actually out in Boston for a couple of years. I know Valerie, you also have a pricing background. Can you share a little bit about that?
Valerie Howard: Yeah, yeah. I mean, I love the numbers, I love the data, and I love the spreadsheets. I'm always going back to those data-driven perspectives on the market. From that perspective, I've worked in pricing for software companies, for airline companies before. I just love seeing the analysis of markets.
Loretta Faluade: Yeah. I know that one of the things that salespeople tend to have a challenge with, and I know that I've been guilty of this, is that when you're working on a deal as a salesperson, sometimes you feel that pricing teams don't really understand the nuances of the market and the customer that you're trying to serve. What would you say about that?
Valerie Howard: Yeah. I would say to that salesperson, there are aspects of perhaps that relationship or that specific customer that that pricing person can help you to discover about that buyer for you.
Valerie Howard: In a lot of cases, I understand, right, that pricing person's not there, having that interaction, having that coffee with their buyer and that special interaction where perhaps they're seeing the emotion of their customer. That's not always going to come through in the data that comes through.
Valerie Howard: But what will come through is what's going on at a market level. How much has that customer been buying in the past? What have their previous prices been? How have they come back with negotiations previously? Those are the kind of aspects where when you're in the middle of an interaction with somebody, you may not be looking at the last several months of interactions. That's what a pricing person can help you to better understand.
Loretta Faluade: Yeah, I can see that. I know that there have been many situations where like you talked about the data, the pricing person was able to help me kind of break down and even understand what similar customers were paying and why they were even recommending a price. So I think the communication that you're talking about between sales and pricing, and the fact that you really need to establish a strong relationship is definitely key.
Valerie Howard: Absolutely. They have access to a wealth of data that they can make sense for that salesperson, right?
Loretta Faluade: Yeah.
Valerie Howard: So what you said just there about helping them to understand what similar customers in the market might be purchasing as well. That would be something where they can help you to figure out how you can deliver more value to your customers.
Loretta Faluade: Yeah, yeah.
Valerie Howard: We have some theories about salespeople on the pricing side that we struggle with as well. One of those concerns is that salespeople seem to be motivated by their incentives. Sometimes they're doing everything they can just to get the deal done, even if that might mean discounting it to the point at which there are no profits left. So what do you say to a pricing person who thinks that way?
Loretta Faluade: That's a great point. I think that the way that I used to see myself whenever I would work in a sales role was that when I was with the customer, I was the company representative to the customer. And when I was within the company, I was the customer's representative within the company. Sometimes the challenge that I had is just basically trying to balance both, right? For salespeople, they want to provide the best price. That's a win for the company, and that's also a win for the customer.
Loretta Faluade: So I think that for us, we're of course very emotionally motivated. We're not seeing all the numbers that you talk about, but we are definitely seeing and hearing what the customer is relaying to us. I know sometimes salespeople can definitely take a step back and really listen to their pricing counterparts to understand where you're coming from. What I can do is I can bring the perspective of the company, of the customer, and really figure out where and how do we align, where do we meet in the middle. Because you want to do the best thing for the customer and also do the best thing for the company.
Valerie Howard: Absolutely. That makes a lot of sense. Where you can bring the perspective of the company and what their needs are, but then also find a way to protect the profits and the needs of the company that you're working for. That makes sense. Yeah.
Loretta Faluade: Yeah, yeah. This kind of ties into the next thing that I was going to say, that salespeople tend to have a challenge with prices, right? We're talking about discounting. Well, sometimes salespeople feel like the first price that pricing is providing, it's not going to win at all. So it's like we get that price and it's like, "I have to go back to the customer, and I already know what they're going to say." So that in itself becomes a challenge. What would you say about that?
Valerie Howard: I would say there's some learned behavior there, right? Because I think in a lot of interactions, we've got to think about the buyer too, right? Is the buyer in a place where their expectation is to negotiate off of that first price as well? So-
Loretta Faluade: That's a good point.
Valerie Howard:... if we have some considerations like, "Okay, well, the expectation is that we're going to go to three rounds of negotiations," because this is just how we always interact with this client. Well, then we know we can't give you that third price on the first go.
Valerie Howard: But at the same time, I will challenge that and say that maybe there are situations where you might want to think about offering a realistic first price, right? Where maybe the buyer is willing to, I guess, sacrifice a little bit of cost to save time on negotiation.
Valerie Howard: Because that's not always something that a lot of buyers have the time for or what they want to do. Especially today, now that a lot of transactions are moving to digital channels, right? People are ordering or maybe doing some reorders of products that they're familiar with through those easy client online portals. You would want to have a realistic price, because you don't want to have to say, "Okay, go put everything in your cart and then call up the sales rep and we can start negotiating pricing." The expectation is that that first price would be something realistic.
Valerie Howard: Something else to note on that though is that buyers said that they would be willing to pay as much as 5% more for that price. That may not be that third price that we're going through the pains of negotiation on. So pricing can help us to figure out all those different types of interactions. And then how do we get to a price quickly, I think is the question.
Loretta Faluade: Yeah. You brought up a good point, because I think from a sales perspective, right, sales teams of course want to win the deal at the highest price, right? Because it's better for the company and let's be realistic, it's going to be better for the commissions. So we definitely do. But I think that there's just that fear of not providing that right price that's going to win the deal. I think that that's where a lot of that tends to stem from.
Valerie Howard: Absolutely. I guess kind of diving deeper into that, one of the, I guess, theories that we kind of want to debunk that pricing sometimes has about salespeople is that they often don't know how to sell on value. Or what would you say to a pricing person that was saying, "They're just negotiating on price. They don't know how to pull different levers for value."?
Loretta Faluade: That's a great point. I think that where a salesperson brings a lot of knowledge is in understanding the selling scenario for that deal. The reality is that as much as we'd love to think that all of our products are fantastic and that every single customer is going to benefit from all the great capabilities and features, that's not the reality, right? It's sometimes going to be used in, let's say, simpler use cases. Or it's going to be used in use cases that are complex, where I can sell the value.
Loretta Faluade: So I think that from a salesperson's perspective, it's when they are looking at a deal, they're looking at an opportunity, they've got to ask themselves, "What does this customer want? What are the challenges, right, are they trying to solve?" And map that to the products and the services that we have. If we're trying to sell the value of a capability that the customer just doesn't need, then there's no added value, and the customer is going to feel like they shouldn't have to pay for that. So I think that that's where the perspective of the salesperson comes in. It's really understanding that not every single deal is going to have the same level of value. That's one thing that I would definitely say about that.
Valerie Howard: Yeah, I think that's a really good point on how sales and pricing teams can interact together to help figure out where those levers are, right? Where perhaps particular customers value certain aspects or capabilities of the products more than others.
Valerie Howard: I think especially right now during the challenges of COVID-19, what we're hearing from a lot of pricing teams out there is that they're being asked to discount, discount, discount. But really, what can you do perhaps maybe in changing warranties or changing service levels to allow for that service or product to get to a level at which you can kind of agree on the willingness to pay or the right price for that?
Loretta Faluade: Yeah. Now this kind of brings me to the third point that I think that a lot of salespeople struggle with, right? We're looking at a deal, right? The deal might be for multi-year. Sometimes it feels like the pricing teams don't see the longevity, right? They just see the profit. They just see the price at a point in time. What would you say about that? Are pricing teams really thinking long, or are they just thinking, "What profit can I capitalize on for today?"?
Valerie Howard: That's a really interesting point. I think the pricing person typically does have access to a lot of data that will help them to see multiple facets of that deal. As a salesperson, I would press on that pricing person and say, "Well, look, deals like this, we expect long-term sticky customers in this situation." Or I would say press on them to find various data points that showcase how a customer like this possibly could be a strategic value to the market. Maybe if there's aspects in which they can add value to your customer base or to your customer profile beyond just the profitability of that one deal, push on your pricing person. Let's come to that data together, I think. Yeah.
Loretta Faluade: I love that. You guys heard it. She said, "Push on your pricing people."
Valerie Howard: Because you can expect that they will push on you as well.
Loretta Faluade: That's right. That's right.
Valerie Howard: I mean, to the point that we have for our third point here on one of the challenges that we commonly see is that salespeople are working off of gut instinct, because they sometimes don't know enough about those customers. Well, the pricing person might push back on you when you say, "This person, we don't need to take profit in this first year. They're going to come through in years two, three, four, and five." Well, is that a gut instinct type of thing? Or is there real data there? So what would you say to a pricing person that's pushing on you and saying, "Okay, I'm not sure you know the customer. Is this just gut instinct?"?
Loretta Faluade: Yeah. I think you bring up a good point. Part of it goes back to a point that you made earlier about the fact that you guys have a lot of data, right? You have a lot of context. You're seeing what customers that are in that industries or that size are paying. We as salespeople are not necessarily seeing that.
Valerie Howard: Sure.
Loretta Faluade: Because you have the data, you can push back and say that, "Well, are we really extracting the value from the customer that we should be extracting?" I think where a salesperson can bring in context is to say that, "Well, the customer does not necessarily have maybe the same selling scenario as these other customers." Or maybe they do, and I need to go back and try and figure out how I can get some of the value out of that.
Loretta Faluade: But I do know that with sales, there were many times when I would get into situations or... I'm not going to say situations. You get into deals and the customer wants this price, and you start doing your own research. My research is more of looking on websites, trying to figure out if I have a colleague in the office who's servicing maybe one of their competitors and understanding if they're buying that. So my research tends to be very manual. If I don't have a lot of time, you're right, I will try and figure out, "Okay, this is what the customer is asking for. What do I feel, right, is kind of where we need to land to close this deal?"
Loretta Faluade: So I think that there is an aspect of gut instinct. I think that this is where pricing and sales need to work a lot closer together, because you guys have the data to back it up.
Valerie Howard: That's true. We need to make it available to you where you are, when you need it, right?
Loretta Faluade: Yeah.
Valerie Howard: I think what is so great about a lot of the technology and the technology that PROS offers is that we do enable collaboration where I don't have to call up the deal desk, or I don't have to make sure that you are in front of me so that I can ask you these questions about my customer. When I can give you the guidance on what your price should be for this type of interaction in a self-serve way, I think that's really powerful for enabling the sales team.
Loretta Faluade: Yeah. One of the things that I would say is that at the end of the day, right, sales and pricing, we're on the same team, right?
Valerie Howard: True.
Loretta Faluade: We work for the same company.
Valerie Howard: True.
Loretta Faluade: We're trying to do what's best for the company and also what's best for the customer. I think the more we establish modes of communicating with each other, the more we trust each other, the more we're transparent with each other, I think that the better we can basically get a lot of these deals done in the future and really see the revenue ramp that we should be seeing for the company.
Valerie Howard: Absolutely. And delivering more value to our customers ultimately. Yes.
Loretta Faluade: That's right. That's right. Well, guys, thank you so much for tuning in on this episode of Coffee Chats with the PROS. Val, thank you so much for being here.
Valerie Howard: Thank you.
Loretta Faluade: I really enjoyed the conversation. We hope you guys have learned about how pricing and sales teams can really work together and collaborate to make sure that they are winning not only for the company, but also for the customer. Until next time, I hope you guys have a fantastic day. Thanks.
Valerie Howard: Thank you.