I find myself in a quandary brought about by the age-old question of discount. You know the one: Should Salespeople Have the Ability to Offer a Discount to Close a Sale?
In his blog post of the same title, Mark Hunter argues that the answer is a resounding NO, absolutely not under any conditions.
He makes some very valid points that salespeople will use any means available to them to win orders, even if you take price out of the equation. Can’t disagree with that, as you should always look to sell the value of your solution.
He also highlights that
Discounting the price cuts profit, and if a company is selling with a 30% variable gross profit, discounting the top-line price by 10% is going to cut the profit line by 30%. That simply is not acceptable.
Again, we are fully in agreement. We even provide a downloadable tool here to allow you to calculate the impact of discounting on your profit and how many extra orders you need to win to make up the difference.
And yet, still the quandary exists. Why?
Sales training generally emphasises that you seek out the person or persons with the Authority to move the process forward or close the deal. That makes perfect sense.
However, by denying your salesperson the ability to negotiate on price, you are removing their authority and unbalancing the relationship even further.
I’ve suffered this from the other side of the table and I know how corrosive this imbalance can be.
The Imbalance of Authority
A few years ago, I was bidding a measurement system into a large Indian Public Sector Enterprise. During the technical and commercial negotiation, they insisted that we bring along a representative with the necessary authority to make binding decisions. That wasn’t me so my Sales Director came along.
In one of our first discussions on the first day (it was a two day process), he said to the customer “So can we finalise the deal today on the basis of our discussions” I thought the guy on the other side of the table was going to have a heart attack! No, no, no, absolutely not. He could agree the various points with us but they had to go through at least two levels of authority above him before they could be signed off, i.e. bind his company to anything. As you might imagine, my boss was not impressed!
Yes, you could argue that it was a little naïve on our part but the fact was that, at the insistence of the customer, we had spent many hundreds of pounds on a totally unnecessary trip. It turned out that I could have negotiated and agreed anything that was discussed and then brought it back to the UK for sign-off.
From that moment forward, our perception of that customer was influenced by their requirement for imbalance of authority around the negotiation table. Ultimately, we withdrew our offer; not solely because of this incident but it certainly played a part. (Their 130+ pages of terms and conditions didn’t help either!)
Can we, and should we, ‘square the circle’ of prices and authority?
Ultimately, it’s your decision on how you run your business. You could give your sales people carte blanche to negotiate the final price (and margins); you could set a minimum acceptable price and margin with a negotiation band in which your sales people can operate; you could follow Mark Hunter’s advice and set the price as the price, with no further discussion.
If you take this last route, then, on an on-going basis, you must provide salespeople with the resources and training to continue refining their selling skills so that they are equipped to sell without discount. To do otherwise is to hamper their abilities to do a good job for you.
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