Build sales’ confidence: Tell them ‘no’!

In B2B companies that have a direct sales force, you will find that a lot of prospective customers simply don’t fit the mould. Perhaps these customers are too big for your pricing model, or they are in an industry that isn’t a target segment, or they have a unique business model. Whatever the reasons may be, sales executives will point these cases out to you and argue for an exceptional discount.

This is perfectly normal. One of the reasons that you have a direct sales force is that your customers are diverse and you have to use negotiation as a price-setting mechanism.

Make sure though, that you actually have a process in place to review requests for exceptional discounts, that go beyond your price model. It can be tempting to trust the senior sales managers’ expertise and simply approve the requested discounts. If you happen to run a software company and marginal costs are very low, it can even be very tempting: isn’t each additional euro a euro of profit?

This would be a mistake. In addition to the obvious impact on contribution margins, there is a strong behavioural reason to push back. If you approve too many deals with exceptional discounts the sales team will lose its confidence in the value of the product.

Prospective customers tell the sales executives that the value of the product is much lower than the price list suggests. This is simply a matter of negotiation and procurement tactics. But, when you approve discounts too easily you don’t tell your sales teams that the customer is negotiating, you tell them that the customer is right!

In the end, you are negotiating the value of your product with the customer, not with the sales executive. The sales executive is simply the messenger between you and the customer. If you do not push back, the customer will. Without enough internal pushback, the sales executive will please the customer and sell the deal for a low price internally, that is, to you.

Moreover, as sales executives lose confidence in the value of the product they will start to set lower expectations with other customers immediately from the first conversations. This is a real silent killer because early expectations determine how a proposal will be received later on in the sales cycle. This is perhaps the clearest reason why you should always review requests for discounts: you are protecting the perceived value of your product.

So how do you protect the value perception? You make sure that there is a set process to review deals with high discounts and you keep track of all requests for exceptional discounts. The best way to do this is with a deal desk, a recurring meeting with senior managers from sales, finance, and product where high-value or high-risk deals can be evaluated. Once you start tracking the deals that make it to the deal desk you should see more than a third of the deals change after review.

A deal desk will eventually increase the confidence sales executives have in the product. At first sales teams will tell customers that management doesn’t approve of the discounts customers want. They will feel backed by management in negotiations, but they might not feel different about the product. But, as soon as customers give in and deals are made at higher price points, sales executives will realise that the product is worth more. Their confidence will increase and they will have the courage to set higher price expectations with new prospects.

In summary, to have trust in the value of your product and its pricing you need to negotiate. Pushing back on discounted deals is management’s role in the negotiation. If you do not have a deal desk to do this, you run the risk of giving away unnecessary discounts and the trust in your product will erode. If you want your sales teams to fight for the right price, you will need to support them by holding firm on pricing and telling them ‘no’. This will give your sales executives the courage to price up and say ‘no’ as well!