Here's a "fun" after-lunch exercise: Grab your nearest salesperson and dissect him on the spot. What do you think you'll find under that polished exterior? What lies beneath all that confidence, training, and customer knowledge?
The hope is to discover they are made of titanium or some other super-alloy that has been reverse-engineered from alien crash sites. After all, the world is in the midst of a brutal economic downturn. Demand has taken a nosedive and sales volumes have tanked. B2B companies need every penny of revenue and margin they can get their hands on.
Salespeople need to be able to close the deal by not giving up too much in price negotiations. In an economic downturn, heightened fears and concerns over losing the deal or alienating the customer tend to dominate the pricing process. When fear sneaks into a salesperson's pricing decisions, the result is very predictable: Margin dollars are left on the table that simply can't be afforded to slip away.
So how do B2B companies guard against these behaviors that can cause so much damage? How can salespeople ensure they are going far enough to win the business without causing unwarranted damage to the bottom line?
The first step is to openly discuss the fear factor. Pull sales teams together and discuss the reality of the situation. Role play and use real-world scenarios and company-specific examples to go beyond the conceptual, so daily behaviors and actions are recognized.
The next step is to address the issues in a more consistent and scalable way through a systemic solution. Pricing data can separate the facts from the fears, and technology can certainly make that pricing data more accessible and actionable. But not all uses of pricing data and technology in a B2B environment are created equal.
A common practice is having pricing analysts "slice-and-dice" pricing data to identify pricing problems. Unfortunately, most of the problems found are with deals that have already been negotiated. At this point, it's too late. Looking in the rearview mirror can only show margin dollars that have already passed by.
Other B2B companies will attempt to push pricing data out to the salespeople to conduct all the necessary slicing-and-dicing and "data-whipping" to arrive with a better pricing decision. All the while a nice theory, it just isn't very practical or realistic. Salespeople need to be spending time selling, not dabbling at being a pricing analyst.
The reality is salespeople don't need more data. They need answers—answers to help win the business without giving up more margin dollars than necessary. Furthermore, salespeople need these answers when they are doing the deal, not after the fact.
Visionary B2B companies are embracing a technology called price optimization to maximize revenues, while protecting their margins. They are using this technology to automatically analyze every deal in real-time, pinpoint optimal price-points for every product on every order, and ultimately win the business without going any further than they have to.
Simply put, price optimization analyzes and interprets all pricing data, then feeds the resulting answers in real time as the deal is actually being negotiated. Companies leveraging this technology have been known to improve margin dollars 15 percent and more.
For example, one Fortune 500 industrial manufacturer has watched their operating margins grow by 12.8 percent in the past year. Another Global 1000 manufacturer produced gains that exceeded their initial expectations and goals by 400 percent—generating $40 million of incremental margin and being recognized as the company's "most impactful growth initiative of the year."
Recent reports by industry analysts are also now reinforcing the value of price optimization in tough economic conditions. According to AMR Research, "establishing fact-based pricing, improving margin realization, and rectifying unprofitable pricing practices can help companies continue to be profitable during a downturn."
Gartner singles out price optimization as "having a more-direct impact on revenues or margins than any other CRM technology through 2010," and clarifies in another report why it is so compelling: "The price optimization and management market differs from most other applications because it offers strategic benefits (helping organizations grow revenue and margins) and operational efficiencies (helping companies save time and cut costs)."
Price optimization technology gives salespeople a titanium spine in negotiations. For every quote they're putting together or for every deal they're negotiating, salespeople can finally know—with scientific precision—exactly how far is "far enough" in that specific situation.
Price optimization may not make a B2B company recession-proof, but it's certainly a powerful means for driving revenues without sacrificing vital margin dollars.
Rafe VanDenBerg is vice president of pricing excellence at Zilliant, an Austin, Texas-based provider of price optimization software. He can be reached at firstname.lastname@example.org or by calling 877-893-1085.