Discounting Does Not Buy Loyalty
Reflecting on the past is a common occurrence. Did results meet expectations, what improvements can be targeted for the future, what learning took place in the past? These are all common questions that managers and leaders should be asking themselves.
More precise metrics are also available to judge past performance. Were margins and profits sacrificed to meet sales quotas? Quarter end and year end discounting are not uncommon but they do tend to diminish the margins that had been targeted in the profit plan. We believe that this is an avoidable trap that can be addressed with advance planning, discipline and training.
The time to protect your margins is now. By reviewing the opportunities in your pipeline you can determine the following:
- Do you have enough opportunities to provide you the revenue that you will be targeting at quarter end or year end?
- What is the confidence that those opportunities will close on the targeted timetable without needing to offer a steep discount?
- Do you have enough bandwidth to focus on all the potential opportunities or are you better served by grading them and focusing on the highest margin opportunities? Let your competitors dissipate their resources chasing the low margin deals.
- Do you need to dial up business development to get more opportunities in the pipeline?
During a phone conversation with a VP of Sales, he told me that his team was busy “cutting deals” to hit their annual revenue plan. This is not selling, and the words chosen made my skin crawl. If your team seems to rely on discounting to get orders, maybe you need to focus more attention on your sales process and developing your team to sell value. The value the customer will receive by using your product or service, not the discount they will get from price list. Building the discipline to ask the customers the right questions to qualify them as a high or low margin opportunity is a learned skill. It takes restraint for sales people who have been conditioned to close, close, close. We know that margins can be improved with well trained sales teams and we’ve seen that happen hundreds of times.
Maximizing your profit margin doesn’t happen by accident. It won’t happen by sending out a memo targeting desired margins for the coming reporting period either. It is a result of leadership identifying the development plans needed for the sales team, providing the training, giving feedback on performance and ongoing coaching to reinforce the process that has been identified to close deals without needing to resort to deep discounts.
Revenue is important and sales quotas are an important part of a business plan. Discounting adds risk as it increases the amount of products to manufacture or services that need to be delivered to achieve a given profit goal. Start today to protect your margins in future quarters. Having regular deal reviews will open your eyes to the reliability and quality of the opportunities in your pipeline. Want to buy some margin insurance? The time is now.
Flannery Sales Systems helps organizations develop and implement a repeatable sales process. Improving the effectiveness of your sales organization is the key outcome we provide to clients. We would welcome an opportunity to explore your needs and understand where your team could benefit from improved skills and sales processes. Flannery Sales Systems works with a broad cross section of industries and we are confident we can enhance your results.
