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7 Reasons Why Salespeople Cut Their Price | Industrial Distribution

No. 1: Because they can

This is one of the strongest arguments against salespeople having pricing authority — because most will cut price when pressed by the customer. In a recent seminar, a group of managers was discussing their discounting levels. One manager explained that their salespeople could discount up to 50 percent off list price without management approval. I then asked the manager, “What is the most common discount percentage your salespeople give?” He shrugged and said “50 percent.” Salespeople should not have pricing authority. Pricing directly impacts profitability. Therefore, pricing is strategic and management alone should have authority.

No. 2: Mixed management signals

When management tells the salesperson to get the order at any price — not to lose it — they are giving the salesperson permission to discount as heavily as needed. When management stresses volume over profitability, they are giving tacit permission to cut the price. To be a value-added organization, management must have the courage to hold the line on price. Salespeople are guided by the management team’s action more than their words.

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7 Reasons Why Salespeople Cut Their Price.

1 Comment on "7 Reasons Why Salespeople Cut Their Price | Industrial Distribution"

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  1. Adam says:

    I’m shocked that the author forgot to mention the biggest reason of all: the principal-agent problem. Sales people cost on price because it’s the cost of doing so is mostly paid by someone other than themselves (their employers).

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