When the market tightens and sales become harder to win, all too often the response of service and manufacturing businesses is to cut price and take a hit on margin.
The problem is, the more you cut price, the more volume you need to shift to stay in profit. The more volume you need, the more sales you have to find, and the more sales you have to find, the more you put yourself under pressure to cut your prices even further.
What was intended as a brief push to keep production going, ends up permanently changing the price expectation in the market. Worst case, the business enters a “doom-loop”. Price is successively discounted and margins become so low that all it takes is one bad debt to wipe out months of profit.
But it doesn’t have to be this way. Here are ten absolute essentials that every sales team in this position must do to avoid the doom-loop:
1. Believe in the brand: know in your heart why yours is “better”
2. Know the need: understand deeply what the buyer needs
3. Separate the sale: make the sale before ever talking price
4. Get paid for profit: have incentives based on profit, not sales
5. Choose the customers: invest where it’s profitable to grow
6. Establish equality: act and feel like a peer of the buyer
7. Select the right style: toughen up whenever it’s appropriate
8. Develop dependency: continually build on the relationship
9. Plan proposals: negotiate on your terms, not on theirs
10. Be willing to walk: confidently turn down bad business
The more the sales team feel the pressure, the more likely they are to lose focus on the above. Ironically that’s precisely when these things are most important. How many of the ten do your team genuinely do?
BOTTOM LINE: This is such an important topic that the next few issues will be dedicated to stepping through each of the ten essentials.