The success of any sales-driven organization in the business-to-business (B2B) space hinges on the sales team’s compensation plan. Over my four decades in B2B sales, I’ve observed that nothing influences the performance of sales personnel more directly than the design and implementation of their compensation plans. Compensation is not merely about rewarding sales achievements but crafting a strategy aligning individual salespeople’s goals with the company’s broader objectives.
A well-structured compensation plan acts as both a motivator and a guide. It compels sales teams not only to meet but exceed their targets, fostering an environment where continuous improvement is not just encouraged but becomes a natural byproduct of the system. For small business CEOs, understanding this dynamic is critical for sustaining and driving growth. Sales compensation is more than just a cost; it’s an investment in the company’s future.
In any sales environment, whether the market is brimming with potential or tightly contested, the compensation plan must be a living document that evolves in response to market conditions, company goals, and team performance. With this adaptability, companies can avoid stagnation or regression in their market positions. As businesses strive to scale and adapt, constructing a compensation plan that genuinely drives the right behaviors becomes all the more pertinent.
To delve deeper into this vital subject, CEOs should consider the immediate impacts of their compensation strategies and their long-term implications on sales culture and employee retention. For those ready to explore the intricacies of effective sales compensation and ensure their strategies are well-suited to their specific business contexts, I am here to lend my expertise. With extensive experience tailoring compensation plans to enhance sales productivity and company profitability, I invite you to reach out for further guidance on crafting a plan that meets and exceeds your strategic goals. You can set a time to talk to me using my link above Book Appointment With Sean.
Join Kevin Lawson and Sean O’Shaughnessey in another insightful episode of “Two Tall Guys Talking Sales.” This week, they welcome back Chris Goade from 360 Consulting in Dallas. Chris dives deep into the importance of customer retention and intentional engagement strategies. Discover how to transform average customers into great ones and learn practical techniques to elevate your sales game.
Key Topics Discussed
Defining Ideal Customers: Chris emphasizes the need for businesses to understand and define what makes a great customer, moving beyond just high revenue.
Intentional Customer Interactions: Pre-call planning and intentionality in customer meetings are important to foster deeper relationships and uncover more business opportunities.
Handling Customer Problems: How addressing and solving problems can turn challenging customers into loyal advocates.
Roadmapping Conversations: Strategies for sales leaders to guide their teams in having structured, meaningful conversations with clients.
Growing Existing Customers: Real-world examples of how focusing on existing customers can lead to significant business growth without new customer acquisition.
Salesperson Development: Techniques to help salespeople grow comfortable with engaging higher-level executives and having more strategic business conversations.
Welcome to this week’s episode of Two Tall Guys Talking Sales, where hosts Kevin Lawson and Sean O’Shaughnessey are joined by Chris Cocca, a sales expert, to discuss the vital aspects of discovery meetings and qualifying prospects for a robust sales pipeline. Tune in as they delve into the methodologies that distinguish successful sales strategies, particularly focusing on the RAIN training concept and the essential practice of understanding client aspirations and afflictions.
Key Topics Discussed:
RAIN Training and Strategic Selling: Chris Cocca shares insights into how RAIN training complements traditional strategic selling concepts, helping salespeople better understand where their clients currently are and where they aim to be.
Aspirations and Afflictions: The discussion highlights the importance of understanding clients’ aspirations and afflictions to maximize the perceived value of offered solutions.
Gap Analysis in Sales: Kevin underscores the importance of gap analysis in sales processes, emphasizing how salespeople should position themselves as solutions within the business context.
The Role of CRM Systems: Chris stresses the significance of CRM systems in capturing and utilizing quality data for sales success, illustrating how technology underpins effective sales strategies.
Role-Playing for Sales Training: A discussion on the practical application of role-playing exercises as a method to enhance sales personnel’s discovery skills.
The Importance of Proper Discovery: Sean wraps up the discussion by reinforcing the necessity of a well-executed discovery process, which is crucial for improving sales outcomes.
Key Quotes:
Kevin Lawson: “I love that you’re tying the gap analysis because as salespeople, we need to be thinking about that gap because it’s the, where do I fit into this business as a solution?”
Sean O’Shaughnessey: “Practice makes easy for asking discovery questions. Asking those business-related questions. Curious how you do that.”
Chris Cocca: “The further apart that those aspirations and afflictions are, the more value you can show because you’ve got a lot to work with. If that gap is really narrow and you don’t define that really well, guess what happens? It’s all about price.”
Additional Resources:
“Strategic Selling” by Miller Heiman https://a.co/d/6qJH9ME
RAIN Sales Training Platform https://salesxceleration.com/news-events/transform-your-sales-performance-with-rain-group-and-sales-xceleration/
Summary:
This episode is a treasure trove of insights for any sales professional looking to sharpen their discovery skills and improve their sales strategy. From understanding the critical role of CRM systems to mastering the art of asking the right questions during client meetings, our guests cover it all. Whether you’re a seasoned sales leader or a new salesperson, this discussion offers valuable techniques that can be immediately implemented to enhance your sales process and ultimately drive better results. Don’t miss out—listen now and transform your sales approach!
Join us next week for more insightful discussions on Two Tall Guys Talking Sales.
The challenge of aligning the right people with the right organizational roles is paramount. As sales leaders and CEOs of small companies, understanding the intricacies of building and maintaining a proficient sales team is crucial for driving growth and achieving success.
The concept of having the “right people in the right seats” is not just a matter of recruitment but an ongoing process of evaluation, development, and strategic alignment. It’s essential to recognize that the adequacy of a sales team is not solely dependent on individual capabilities but also on how these individuals fit within the broader sales strategy and organizational culture.
Compensation plans, customer relationship management (CRM) systems, and the overarching sales infrastructure play significant roles in enabling sales teams to perform at their best. However, the foundation of a high-performing sales team lies in the continuous investment in people. This involves identifying talent and fostering an environment that promotes learning, growth, and adaptation.
Training and development are often overlooked aspects of sales management. Surprisingly, a significant number of sales professionals and leaders go years without receiving formal training. This gap in skill development can lead to stagnation and inefficiency. Therefore, organizations must prioritize ongoing education and training to keep their sales teams agile and competitive.
Furthermore, it is critical that individual roles align with the organization’s goals. This may involve reevaluating existing roles, responsibilities, and processes to ensure they contribute effectively to the sales strategy. Sometimes, the solution does not lie in hiring new talent but in optimizing the current team’s structure and roles to leverage their strengths more effectively.
Performance improvement plans (PIPs) and the concept of “top-grading” the sales team highlight the importance of accountability and continuous improvement. While PIPs can be a tool for addressing performance issues, they should not be the first resort. Instead, leaders should focus on setting clear expectations, providing the necessary resources and support, and fostering a culture of excellence.
Sometimes, the issue may not be with the sales personnel but with the systems, processes, or even the leadership approach. Before making drastic decisions, such as replacing team members, it’s worth taking a step back to assess whether the organization provides the right environment, tools, and guidance for the team to succeed.
Ultimately, building and managing an effective sales team is an intricate process that requires a balanced approach. It involves ensuring that you have the right people in place and that these individuals are equipped, motivated, and aligned with the organization’s goals. As sales leaders and managers, it’s essential to identify and address gaps, foster a culture of continuous learning and improvement, and strategically align team structures and processes to drive sales performance.
For salespeople, sales managers, and CEOs of small companies, understanding these dynamics and adopting a holistic approach to sales management can significantly enhance their team’s effectiveness and their organization’s ability to achieve its sales objectives.
Actionable items that you can do today
Evaluate Your Team’s Composition: Take a moment to assess the current structure of your sales team. Identify whether each member is in the role that best suits their skills and where they can contribute the most to the team’s objectives. This could involve one-on-one discussions to understand their goals, strengths, and areas for improvement.
Initiate a Training Needs Analysis: Conduct a thorough training needs analysis to identify gaps in skills and knowledge within your sales team. This should cover everything from product knowledge to sales techniques and the use of CRM systems. Based on this analysis, outline a tailored training program to address these gaps and elevate your team’s performance.
Review and Adjust Compensation Plans: Analyze your current compensation and incentive structures to ensure they align with your organizational goals and sales targets. Adjustments might be necessary to better motivate your team and encourage the behaviors and outcomes you wish to see. This could mean introducing new performance bonuses, adjusting commission rates, or implementing non-monetary rewards that drive motivation.
Implement a Sales Enablement Strategy: Start developing or refining your sales enablement strategy to ensure your sales team has the tools, resources, and content they need to succeed. This could involve updating sales playbooks, improving CRM processes, or investing in new sales enablement technology. The goal is to make it easier for your sales team to sell effectively and efficiently.
Few topics in sales stir as much discussion and attention as compensation plans. The proper compensation structure can ignite a team’s performance, attract top talent, and drive a company toward its strategic goals. Conversely, a poorly conceived plan can lead to demotivation, high turnover, and missed targets. This discussion delves into the intricacies of designing compensation plans that motivate and align with a company’s broader objectives, offering insights for salespeople, sales managers, and CEOs alike.
Compensation in sales is not just about rewarding past successes; it’s a strategic tool that shapes future behavior. The fundamental premise is straightforward: sales professionals are motivated by earnings potential. Yet, applying this premise within compensation plans can be complex, nuanced, and sometimes contentious. It’s essential to balance base salary and variable compensation, ensuring sales representatives are adequately supported and incentivized to pursue new business aggressively.
The debate between 100% commission versus a guaranteed salary represents the spectrum of risk and reward in sales compensation. On one end, a 100% commission plan offers unlimited earning potential but lacks security, potentially leading to a high-stress culture and a short-term focus. It also makes it much more difficult to recruit younger sales superstars who may not have the financial security to afford a 100% commission compensation plan. Conversely, a guaranteed salary provides stability but might dampen the urgency and hunger that drive sales excellence. The consensus among seasoned sales leaders points to a balanced approach, often epitomized by a 50/50 split between base salary and variable compensation. This structure aims to provide a safety net while ensuring sales efforts directly impact earnings.
Understanding the market potential within a sales representative’s territory is critical when setting quotas and compensation. For larger teams, the ability to average performance across the group can help smooth out individual variances. However, in smaller teams or founder-led sales organizations, each member’s contribution is magnified, demanding a more nuanced approach to quota setting. Regardless of team size, aligning individual quotas with company objectives requires a blend of data analysis, market insight, and an appreciation for each territory’s unique challenges and opportunities.
Beyond the structure of compensation plans, the timing and criteria for payouts are pivotal. Monthly payouts can incentivize immediate results and help maintain momentum, whereas quarterly payouts may lead to strategic deal timing but can also introduce cash flow challenges for sales professionals. Moreover, compensation plans should evolve in tandem with a company’s strategic goals, ensuring that sales efforts are aligned with the organization’s overarching priorities.
Crafting effective sales compensation plans is both an art and a science. It demands a deep understanding of human motivation, a clear vision of company objectives, and a commitment to fairness and transparency. By carefully designing compensation structures that reward performance, foster team collaboration, and support long-term strategic goals, companies can create a sales culture that not only meets targets but exceeds them, driving growth and success in the competitive world of B2B sales.
Immediate Action Item 1: Evaluate and Adjust Your Compensation Structure
Assessment of Current Plans: Begin by thoroughly assessing your current sales compensation plan. This involves evaluating how well the existing structure supports your company’s strategic goals and motivates your sales team. Are your sales representatives meeting their targets? Do they feel motivated and supported? These questions can uncover valuable insights into the effectiveness of your compensation plan.
Balanced Compensation Review: Reflect on the balance between your organization’s base salary and variable compensation. Does it align with the 50/50 split recommended by seasoned sales leaders? If not, consider adjusting this balance to provide both security and incentive to your sales team. This balance is crucial for motivating your team while ensuring they are adequately supported.
Action Steps:
Survey your sales team to gather feedback on the current compensation plan.
Analyze sales performance data to identify patterns or areas for improvement.
Consult with HR or compensation specialists to explore potential adjustments.
Implement a pilot program for a new compensation structure in a small team or region to measure its impact before a company-wide rollout.
Immediate Action Item 2: Align Compensation with Strategic Goals and Territory Potential
Quota Setting and Territory Analysis: It’s essential to align individual quotas with the sales territory’s potential and the overarching company objectives. This alignment ensures that sales efforts are directed towards strategic goals, optimizing both individual and team performance.
Compensation Plan Evolution: Regularly review and update your compensation plans to align with your company’s strategic goals. This might mean adjusting the payout criteria, the balance between base and variable compensation, or the targets set for sales representatives.
Action Steps:
Conduct a territory analysis to ensure realistic quotas align with market potential.
Set up a quarterly review process for the compensation plan to ensure it remains aligned with company objectives and market conditions.
Engage sales managers in discussions about territory potential and strategic goals to ensure their input is considered in compensation planning.
Communicate changes in compensation plans clearly and effectively to the entire sales team, ensuring they understand how these changes benefit both them and the company.
Implementing these action items can lead to a more motivated sales team, better alignment with strategic goals, and improved sales performance. Remember, the key to successful sales compensation is not just in the design but in the ongoing evaluation and adjustment to meet the evolving needs of both your sales team and your company.
In this sports-oriented episode of “Two Tall Guys Talking Sales,” hosts Kevin Lawson and Sean O’Shaughnessey dive into the fascinating parallels between March Madness NCAA basketball tournaments and sales strategies. Kevin and Sean take this opportunity to explore how the tournament’s structure and the season leading up to it offer valuable lessons for developing winning sales strategies.
Key Topics Discussed:
Preseason Preparation and Regular Season: The significance of constant improvement and team synergy throughout the sales season to refine strategies, similar to a basketball team’s journey to the NCAA tournament.
Tournament Strategy and Sales Planning: Drawing analogies from the NCAA’s regional competitions and seed rankings to sales approaches, market positioning, and competitive analysis.
Winning the Customer Relationship: Identifying the final sales deal as the ‘national championship game,’ focusing on strategic planning and execution to win customer trust and secure business.
Overcoming Adversity and Learning from Losses: The importance of analyzing lost sales opportunities (akin to unexpected tournament upsets) to understand and improve future sales tactics.
Sales Team Dynamics and Individual Growth: Encouraging personal development and adapting roles within the sales team for optimal performance, paralleled with a basketball team’s adjustment to injuries and game dynamics.
Key Quotes:
“The trophy in sales is the customer relationship.” – Kevin Lawson
“Only one team ends the season with a victory; similarly, in sales, there’s only one winner.” – Sean O’Shaughnessey
“It’s important to win through better execution of the plan… and hard work.” – Sean O’Shaughnessey
“We’ve got to figure out our place in the market… It’s the same progression in business.” – Kevin Lawson
This episode is a masterclass for sales professionals and leaders looking to elevate their game by drawing inspiration from March Madness’s structure, strategy, and spirit. Kevin and Sean’s dialogue reminds us of the importance of preparation, strategy, resilience, and continuous learning in the quest to win in sales. As the NCAA tournament captivates basketball fans, let it also inspire sales teams to strive for excellence, adapt to challenges, and ultimately clinch their championship trophy: a successful and lasting customer relationship
In business-to-business sales, extending discounts holds a place of ancient reverence, a tactic as old as commerce itself. This approach, crafted to escalate sales volume, capitalizes on a fundamental business purchasing principle: the quest for cost efficiency. By lowering the prices of goods or services, firms aspire to enhance the desirability of their products, thereby aiming to boost demand and, consequently, sales volume. Employing this tactic becomes particularly compelling in scenarios such as launching a new product line during contract renewal phases or seeking to penetrate deeper into highly competitive markets. The underlying premise is straightforward: reduced prices are anticipated to drive up sales volumes, potentially offsetting the dip in margins per unit sold.
However, offering a prospect a discount warrants careful consideration. While the immediate benefits—spiked interest from potential clients, an uptick in sales volumes, and the rapid inventory turnover—might seem enticing, the broader implications unveil a complex set of ramifications. This article endeavors to peel away the layers enveloping this widespread sales strategy, illuminating its influence on profitability, and evaluating its sustainability as a long-term practice.
Navigating the Complexity of Discounting in B2B Sales
At initial consideration, discounts present an ostensibly harmonious scenario: clients secure the products or services they need at reduced rates, while companies witness a boost in sales activity. Nevertheless, the stark reality is that indiscriminate discounting can significantly undermine profitability. This necessitates a nuanced understanding of profitability metrics: gross profit versus net profit.
In professional business-to-business sales, the sales team doesn’t need a CPA, but they should know the basics of finance. Understanding the interplay between Gross Profit, Net Profit, COGS (Cost of Goods Sold), and SG&A (Selling, General & Administrative Expenses) is pivotal for any organization aiming to fine-tune its operational efficiency and profitability. These metrics, each distinct in scope and impact, collectively offer a comprehensive view of a company’s financial health. Let’s delve into these concepts, exploring their nuances and significance in the broader context of business management.
COGS: The Direct Costs Tied to Production
COGS encompasses the direct costs attributable to the production of the goods or services sold by a company. This includes raw materials, labor costs directly involved in production, and manufacturing overheads. COGS is a critical metric for management to consider, as it directly affects the Gross Profit. By optimizing production processes or negotiating better terms with suppliers, a company can effectively lower its COGS, thereby increasing its Gross Profit margin—an essential strategy for enhancing profitability.
SG&A: The Overhead of Running a Business
SG&A represents the cumulative expenses incurred from selling, general, and administrative activities. These are the costs associated with operating the business that are not directly tied to production, including sales force salaries, marketing expenses, rent, utilities, and administrative salaries. SG&A expenses are significant because they do not directly contribute to producing goods or services; they are essential for the company’s day-to-day operations and strategic positioning in the market. Effective management of SG&A expenses can significantly influence a company’s Net Profit, as these costs can either erode or support profitability depending on how they are controlled.
Gross Profit: The Initial Gauge of Profitability
Gross Profit is the initial measure of a company’s financial performance, calculated by subtracting the Cost of Goods Sold (COGS) from the total revenue generated from sales. This figure is crucial because it reflects the efficiency with which a company produces or sources its goods and services before accounting for broader operational costs. For instance, if a company generates $1 million in sales and incurs $600,000 in COGS, its Gross Profit would be $400,000. This metric indicates the company’s production or procurement efficiency but does not account for the overheads and other operating expenses that also impact the company’s profitability.
Net Profit: The Ultimate Measure of Financial Health
Net Profit, often considered the bottom line, is the ultimate indicator of a company’s profitability after all expenses, including COGS, SG&A, interest, and taxes, have been deducted from total revenue. It is the most comprehensive measure of a company’s financial performance, revealing what remains as actual profit. For example, continuing from the Gross Profit scenario, if the company has additional operating expenses of $200,000 and taxes and interest amounting to $50,000, the Net Profit would be $150,000. This figure is paramount for stakeholders to assess the company’s profitability and sustainability.
Gross profit, calculated as the revenue from sales minus the cost of goods sold (COGS), provides an initial insight into the financial gain from sales. Yet, the net profit, the remainder after deducting all operational expenditures, interest, taxes, and Selling, General & Administrative (SGA) expenses from the gross profit, genuinely encapsulates a company’s financial health.
How All Of This Applies to Salespeople
In most companies, the sales team cannot change the COGS or SG&A for any deal. The only thing salespeople can typically control is the Selling Price; from that Selling Price, the costs have to be deducted to calculate the Net Profit.
Let’s dissect the financial dynamics further. Assume a service in the B2B sector is offered at a standard rate of $100,000, with a COGS of $60,000, rendering a gross profit of $40,000—a 40% gross margin. With the 20% SGA and other operational costs factored in, the net profit might settle at $20,000 per sale, constituting a 20% net margin on the transaction.
Assuming the costs in the company are static, introducing a 10% discount drops the service price to $90,000. While the gross profit shrinks to $30,000 after we take out the $60,000 in COGS, the net profit is disproportionately affected. The fixed nature of SGA expenses means they remain constant, dramatically squeezing the net margin. In this example, the net profit after the 10% discount drops from $20,000 to $10,000.
Let’s summarize this example without all of the wording:
0% Discount
5% Discount
10% Discount
List Price
$100,000
$100,000
$100,000
Selling Price
$100.000
$95,000
$90,000
COGS
$60,000
$60,000
$60,000
Gross Profit
$40,000
$35,000
$30,000
SG&A
$20,000
$20,000
$20,000
Net Profit
$20,000
$15,000
$10,000
As you can see from the above table, a 5% discount means a 25% reduction in Net Profit for this hypothetical company. A 10% discount means a 50% discount in Net Profit.
The critical question then becomes: How much additional sales volume is necessary to maintain or increase overall profitability post-discount? The revelation often shocks: a minor discount demands a significant upsurge in sales volume to compensate for the reduced net profitability—a challenging feat in the B2B landscape, where sales cycles are longer and client acquisition efforts more intensive.
Let’s show that math more clearly with the above example. Let’s assume that the above company only sells products with a $100,000 list price and they do 100 deals in a year. That means if all of the deals are at least price, they will achieve a gross revenue of $10,000,000 and a net profit of $2,000,000.
However, if the company gives everyone a 5% discount and the company’s stockholders want the same net profit, they will have to do $2M divided by $15K deals. That is 134 deals or a 34% increase in the number of deals. This means that a 5% discount means the sales team has to close 34% more deals to contribute the same net profit to the shareholders.
If the company gives everyone a 10% discount and the company’s stockholders want the same net profit, they will have to do $2M divided by $10K deals. That is 200 deals or a 100% increase in the number of deals. This means that a 10% discount means the sales team has to close twice the number of deals to contribute the same amount of net profit to the shareholders.
Reassessing the Discount Strategy
The appeal of leveraging discounts to amplify sales volume in the B2B sector is undeniable but fraught with pitfalls. Such strategies can erode net profitability, necessitate unrealistic sales volume increases to maintain financial stability, and might inadvertently signal desperation or devalue the proposition in the eyes of business clients. The purpose of this article is not to outright condemn discounting but to advocate for a strategic application thereof. Companies should meticulously evaluate the immediate allure of increased sales against the enduring implications for profitability. In numerous instances, alternative strategies that add value or enhance service offerings may present a more viable route to growth and financial robustness.
The Commission Conundrum: Revenue vs. Profitability
In the intricate ecosystem of sales and profitability, a critical and often overlooked element is the structure of sales commissions. The traditional commission model incentivizes sales personnel—and, by extension, their managers—based on the volume or dollar value of sales achieved, not the profitability of those sales to the company. This misalignment between the sales force’s motivations and the company’s overarching financial goals can lead to a significant disconnect, particularly in the context of discounting strategies.
As a lever of motivation, sales commissions are designed to spur sales teams to higher performance levels. However, when commissions are tied solely to revenue without consideration for profitability, it encourages a focus on the top line at the expense of the bottom line. For instance, a salesperson might be driven to close deals by offering discounts, thereby boosting their sales figures—and, by extension, their commissions—even if such discounts erode the company’s net profit. This scenario is further compounded if the salesperson’s manager, who also benefits from the team’s revenue performance, supports such discount-driven sales tactics without regard to their impact on profitability.
This model creates a fundamental misalignment between the sales team’s goals and top management’s strategic objectives. While sales teams are propelled towards maximizing raw revenue, top management’s primary concern is enhancing net profit—the company’s financial health indicator. The crux of the problem lies in the fact that discounts, while potentially beneficial for achieving short-term sales targets, can significantly undermine net profit margins. This is particularly true in industries where the cost structure is fixed or semi-fixed, and reducing prices does not proportionately decrease costs.
Implementing Safeguards: Aligning Sales Strategies with Profitability Goals
The solution to this problem lies in implementing robust safeguards and a strategic overhaul of the commission structure. First, establishing a rigorous discount approval process can be an effective checkpoint. This process ensures that discounts align with broader financial strategies and the company’s profitability goals. Such a system might include tiered discount limits, beyond which sales personnel must obtain managerial or executive approval.
Second, reconfiguring the commission model to incorporate profitability metrics can realign the incentives for the sales team with the company’s financial objectives. This might involve setting commissions based on net profit generated by sales rather than gross revenue. Alternatively, a balanced scorecard approach, with MBO goals (Management By Objective), including revenue and profitability targets, can incentivize sales personnel to consider the broader financial implications of their sales tactics.
Bridging the Gap Between Sales and Profitability
The alignment of sales strategies with the company’s profitability objectives is not merely a financial imperative but a strategic necessity. By reevaluating commission structures and implementing safeguards against indiscriminate discounting, companies can ensure that their sales efforts contribute positively to the bottom line. This approach fosters a culture where the sales team is not just focused on meeting revenue targets but is also mindful of the profitability and financial health of the organization. In doing so, companies can bridge the gap between pursuing raw revenue and the imperative of net profit, ensuring long-term sustainability and growth. This strategic alignment is crucial for navigating the complex interplay between sales incentives and company profitability, ultimately leading to a more cohesive and financially robust business model.
The delicate balance between pursuing immediate revenue gains through discounts and maintaining the integrity of net profitability demands a strategic reevaluation. The allure of discounts, often seen as a shortcut to achieving sales targets, undeniably poses a significant challenge to profitability. However, the proper resolution lies not in the mere restriction of discounts but in the fundamental shift towards selling value, cultivating champions within client organizations, and ensuring a seamless product alignment with the customer’s needs and objectives. This comprehensive approach mitigates the adverse effects of discounting on profitability and fortifies the foundation for sustainable, value-driven sales practices.
Selling Value: Elevating the Conversation Beyond Price
The cornerstone of mitigating the need for discounts is effectively articulating and demonstrating value. Value selling transcends the simplistic equation of cost versus features, delving into the tangible and intangible benefits that the product or service brings to the customer. This involves a meticulous understanding of the customer’s business landscape, challenges, and strategic objectives. By positioning the product or service as a pivotal solution that addresses these elements, sales professionals can pivot the conversation from price to value, emphasizing the return on investment (ROI) and the broader impact on the customer’s business.
The art of selling value requires a systematic approach, blending analytical rigor with a deep empathy for the customer’s context. It involves crafting a narrative that resonates with the customer’s aspirations and needs, backed by concrete data and case studies that illustrate the positive outcomes achieved by similar clients. This strategy elevates the customer’s perception of the product and fosters a more profound, consultative relationship that is less susceptible to the commoditization pressures that drive discounting.
Building Champions: The Power of Internal Advocacy
Another pivotal strategy is the cultivation of champions within the customer’s organization. Champions are internal advocates who understand and believe in the product or service’s value and are willing to mobilize support for it within their organization. Building champions involves identifying potential advocates based on their influence, alignment with the product’s value proposition, and professional objectives.
Empowering these champions requires providing them with the knowledge, tools, and confidence to articulate the value proposition internally effectively. This includes tailored presentations, compelling case studies, and data-driven ROI analyses that they can use to persuade other stakeholders. Champions serve as a critical bridge, amplifying the sales message and facilitating a deeper engagement with the customer organization. They help navigate internal dynamics and objections, making the sales process more efficient and reducing the reliance on discounts as a persuasive tool.
Aligning Product to Customer’s Needs and Goals: The Keystone of Value
At the heart of the solution to discount-driven sales challenges lies the alignment of the product or service with the customer’s needs and goals. This alignment ensures that the offering is not just a generic solution but a strategic fit that addresses specific challenges and capitalizes on unique opportunities within the customer’s business. Achieving this alignment requires a consultative sales approach characterized by active listening, probing questions, and a collaborative exploration of the customer’s business environment.
This process involves understanding the current needs and anticipating future challenges and opportunities. The sales professional must adopt a strategic advisor role, leveraging insights and expertise to guide the customer toward solutions that meet immediate needs and support long-term objectives. This level of alignment fosters a partnership-based relationship, where the product or service’s value is inherently recognized, reducing the customer’s sensitivity to price and diminishing the need for discounts.
A Strategic Blueprint for Sustainable Sales Success
The challenges posed by discounting strategies to profitability are significant but manageable. The proper solution lies in a holistic approach that focuses on selling value, building champions, and ensuring a deep alignment between the product and the customer’s needs and goals. This strategy requires a shift from transactional sales tactics to a more consultative and value-driven sales methodology.
By effectively selling value, sales professionals can elevate the conversation beyond price, emphasizing the broader business impact and ROI of their offering. Building champions within customer organizations create powerful allies who can advocate for the product internally, leveraging their influence to support the sales process. Finally, ensuring that the product is closely aligned with the customer’s strategic needs and goals solidifies the foundation for a partnership-based relationship, where the inherent value of the solution diminishes the focus on price and negates the need for discounts.
This approach addresses the immediate challenge of maintaining profitability in the face of discount pressures and lays the groundwork for sustainable sales success. It fosters more profound and more meaningful customer relationships built on a foundation of trust, value, and strategic alignment. In doing so, it positions companies to achieve short-term sales targets and long-term business objectives, securing a competitive advantage in the complex landscape of B2B sales.
Actions That You Can Take Today
To address the challenge of discounts affecting profitability without altering COGS or SG&A costs, sales managers and CEOs can implement the following five actionable steps today to enhance their company’s profitability through strategic sales practices:
Reframe the Sales Conversation Around Value, Not Price: Train your sales team to pivot discussions with clients from price to the comprehensive value your product or service offers. This involves deepening their understanding of the client’s business needs and how your solutions can address these needs in a way that contributes positively to the client’s profitability and operational efficiency. Encourage your team to prepare case studies and ROI analyses that clearly articulate the long-term benefits and cost savings of choosing your product or service over cheaper alternatives.
Introduce a Value-based Commission Structure: Redesign the commission structure to reward sales personnel not just for gross revenue, but also for selling at or near list price, thereby preserving or enhancing profitability. This could include bonuses for deals closed without discounts or additional incentives for upselling value-adding features or services that improve customer outcomes without significantly increasing discount levels.
Establish Strict Discount Approval Processes: Implement a tiered approval process for discounts requiring higher management levels to sign off on larger discounts. This process should include a profitability analysis to ensure that any discounts granted do not erode the net profit margin below an acceptable threshold. Making the discounting process more rigorous will encourage sales teams to seek alternative strategies to close deals.
Cultivate and Empower Internal Champions: Develop a program to identify and nurture champions within your prospects—key individuals who understand and believe in the value of your solutions. Provide these champions with the tools and information they need to advocate effectively on your behalf, turning them into an extension of your sales team. This might include exclusive insights into product development, customized value assessments, or early access to new features or services.
Align Sales Goals with Strategic Business Objectives: Ensure that your sales team’s objectives align with the company’s broader strategic goals, particularly profitability. This might involve setting specific targets for selling certain products or services with higher profit margins or developing bundled offerings that meet customer needs more comprehensively while improving profitability. Regularly review these goals and the strategies employed to achieve them, adjusting as necessary to keep your sales efforts focused on enhancing the bottom line.
By implementing these strategies, sales managers and CEOs can drive their teams towards practices that maintain and potentially increase profitability, even when discounts are off the table. These action items foster a culture of value selling, strategic negotiation, and customer-centric solutions, ultimately contributing to sustainable growth and profitability.
As the new year unfolds, the urgency to hit the ground running in sales is paramount. My mission is to guide you toward a robust sales strategy. The cornerstone of this strategy? Mastering your Customer Relationship Management (CRM) system.
The Critical Role of CRM in Sales Success
A CRM is more than just a tool; it’s the lifeline of your sales process. If you’re still on the fence about using a CRM or struggling with your existing system, it’s time for a change. A well-implemented CRM can revolutionize how you track, interact with, and close deals with your clients.
Practical CRM Usage: Beyond the Basics
Are you just logging in and updating records, or are you actively utilizing your CRM to set daily goals and time blocks? A proactive approach to your CRM involves strategic planning and analysis. Use it to identify trends, focus on high-potential clients, and set specific targets for customer interactions.
If your organization hasn’t adopted a CRM yet, don’t wait. Modern CRMs are affordable, with some even free, offering a significant return on investment. As a sales professional, taking charge of your client management through a personal CRM can set you apart and drive your success.
Understanding the full capabilities of a CRM takes time. For more detailed advice and strategies, reach out to me directly. I offer a wealth of resources on effective CRM utilization on my website and LinkedIn, tailored to enhance your sales performance.
Remember, a CRM isn’t just about managing contacts; it’s about maximizing your sales efficiency and effectiveness. Make this year the year you harness the full power of your CRM, and watch as your sales figures soar.
Happy selling, and here’s to a successful and prosperous year ahead!
Please check out my short video below for more helpful guidance on the importance of your CRM in growing sales.
When top management joins a sales call, the dynamic shifts dramatically. Like a well-rehearsed play, every dialogue, every objection, and every response can determine the final outcome. In this complex environment, role-playing transcends its initial perception as a mere preparatory exercise, morphing into an indispensable strategy for fine-tuning client engagement tactics. For sales calls involving top management, role-playing is not just beneficial; it is essential. It serves as a rehearsal space, allowing for the anticipation of challenges and the crafting of cohesive strategies.
To be effective, role-playing must replicate the actual sales situation as closely as possible. This means mirroring the physical environment, whether it’s a conference room or a virtual meeting space, and incorporating realistic names, data, and potential scenarios. Pay attention to the details since the more accurate the simulation, the more valuable the insights gained. A well-structured role-playing session will have a designated observer, ideally someone from the sales or training team, whose role is to provide unbiased, constructive feedback. This feedback is instrumental in refining the approach, responses, and overall strategy.
Anticipating and Rehearsing for Varied Client Interactions
Remember, unpredictability is the only constant. Role-playing should, therefore, encompass a wide array of scenarios, from the most optimistic to the most challenging. This could include sudden objections, queries about pricing strategies, or concerns about product implementation. Anticipating these scenarios and rehearsing responses instills confidence in the sales team and ensures that both the team and management are aligned in their approach. It’s about being prepared for every turn the conversation could take.
Feedback: The Cornerstone of Role-Playing
In these practice sessions, feedback is invaluable. The observers and the participants shouldn’t just identify areas of improvement but also recognize and reinforce what works. The observer plays a crucial role here, offering insights into what went wrong and effective tactics and strategies. This feedback should be seen as a growth tool, guiding the sales team and management toward a more refined, impactful interaction with the client.
One of the most significant advantages of role-playing is its opportunity to hone objection-handling skills. In these simulated environments, sales teams and management can practice and perfect their responses to potential client pushbacks. This preparation is crucial, as it enables the team to confidently handle real-time objections, turning potential deal-breakers into opportunities for further engagement.
Active Listening: A Skill Perfected Through Simulation
A common pitfall in sales calls is the tendency to focus solely on delivering the presentation or what the sales and management team will say at the expense of truly listening to the client. Role-playing sessions offer an excellent opportunity to practice active listening. By engaging in these simulated conversations, both the sales team and management learn to tune into the client’s needs and concerns, ensuring that the actual sales call is a two-way dialogue rather than a one-sided presentation.
Implementing Role-Playing as a Standard Practice
To bring this theory into practice, identify an upcoming high-stakes joint sales call and schedule a dedicated role-playing session. Include all key participants, especially those from top management, and create scenarios that mirror the most likely challenges you’ll face. An experienced member of your team should observe and provide actionable feedback. If possible, record these sessions for further analysis and review.
This approach serves several purposes. It prepares the team for the actual call, ensuring everyone is aligned in strategy and messaging. It also helps establish a rapport between the sales team and management, fostering a sense of collaboration and unity. Remember, the goal here is to secure the deal at hand and build a robust, collaborative framework that enhances your overall sales strategy along with the skills of the sales personnel when management is not riding along to the sales call.
In preparation for joint sales calls with top management, role-playing is a strategic necessity. It’s a commitment to excellence that pays dividends not just in the immediate deal but across the sales spectrum. By investing time and resources in these sessions, you’re not just preparing for a sales call; you’re honing a skill set that elevates your entire sales approach.
Welcome to the latest episode of “Driving New Sales: Transforming Small Businesses into Sales Powerhouses,” where we dive into the critical aspects of B2B sales. Today, Sean O’Shaughnessey, a seasoned consultant in sales organization enhancement, sheds light on the importance of staying updated with client news and updates. This episode is proudly sponsored by “Two Tall Guys Talking Sales,” a podcast by Sean O’Shaughnessey and Kevin Lawson focusing on boosting sales management and methodologies.
Key Topics Discussed
The Power of Staying Attuned to Client’s Business World: Sean discusses the significance of being proactive and informed about clients’ activities and how this approach transforms sales teams into strategic forces in B2B sales.
Practical Tools and Strategies for Monitoring Client Updates: Explore the utility of Google Alerts and the role of social media in gaining insights into clients’ strategic moves.
Interpreting Client News as Opportunities: Understanding how to read between the lines of client announcements and news for potential sales opportunities.
Context and Timing in Sales Outreach: The importance of timing your sales outreach to align with clients’ immediate needs or strategic goals.
Leveraging Analytics and CRM for Comprehensive Understanding: How to use analytics and CRM software to analyze client data and market trends for a more informed sales strategy.
Aligning Monitoring Efforts with Sales Objectives: Ensuring all gathered information is strategically used to drive sales goals.
Key Quotes
“Staying informed about your clients’ activities is not just advantageous; it’s essential.”
“Google Alerts is a straightforward yet powerful tool… It’s about maximizing efficiency and staying one step ahead.”
“Data and tools are only as effective as the strategy behind them.”
Set Up Advanced Google Alerts: Tailor your alerts with specific queries for each client to filter the most relevant information.
Actively Engage on Social Media: Monitor and engage with your clients’ social media activities to build relationships and gather insights.
Analyze Client Structural Changes: Stay informed about your clients’ mergers, expansions, or layoffs and adapt your sales strategies accordingly.
Conduct In-Depth Report Analysis: Regularly review clients’ quarterly and annual reports to tailor your sales approach effectively.
Perfect Your Outreach Timing: Use your insights to determine the best timing for your sales approach, making it as impactful as possible.
Conclusion
In today’s episode, Sean O’Shaughnessey has provided invaluable insights into how monitoring client news and updates can revolutionize your sales strategy. Remember, successful sales are not just about the transaction; they are about offering timely, relevant solutions that align with the client’s current state and needs. Stay tuned for more episodes to continue transforming your business into a sales powerhouse.
Kevin and Sean together have about 60 years of experience in professional selling. This podcast helps people in sales, sales leadership, and business leadership or company owners realize the maximum value of their company by improving their revenue generation capability. This podcast is designed to help those people enhance their companies’ sales management practices, methodologies, processes, teams, and messaging.
Sean O’Shaughnessey and Kevin Lawson are Fractional Vice Presidents of Sales. They operate their own companies separately but have partnered for this podcast to advise salespeople and SMB companies on successful strategies and methodologies.
Kevin is the CEO of Lighthouse Sales Advisors. Lighthouse Sales Advisors is a sales leadership solution provider for small businesses. Lighthouse helps business owners navigate the potential pitfalls around sales growth, sales turnaround, or scaling up by leveraging sales acumen and decades of experience to build effective sales teams. https://www.lighthousesalesadvisors.com/
Sean is the CEO of New Sales Expert. He helps company owners realize the maximum value of their company by improving their revenue generation capability. He helps owners enhance their sales management, methodologies, processes, teams, and messaging.
Discover how to stay ahead in the competitive world of B2B sales with Sean O’Shaughnessey’s expert insights. This episode of “Driving New Sales” is an essential listen for any sales professional, manager, or small business CEO looking to elevate their sales strategy and stay attuned to their clients’ evolving business world. Tune in now for strategies that will transform your approach to sales!