“If you align your reps with the company’s goals, they’ll defend the margins better.” – Steve Benson in today’s Tip 765
What can sales managers do to help their reps protect the margin and keep sales up in a bad economy?
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Scott Ingram: You’re listening to the Daily Sales Tips podcast and I’m your host, Scott Ingram. Today’s tip comes from Steven Benson. Steve is the Founder and CEO of Badger Maps, the #1 route planner for field salespeople. He also hosts the Outside Sales Talk podcast and is the founder of the Sales Hall of Fame. He sent me kind of a long tip, so I decide to break it into two parts, here’s part one:
Steve Benson: Hi, I’m Steve Benson, CEO of Badger Maps. Today. I’m going to talk a bit about the action sales managers need to take in a recession and some of the challenges and solutions that sales reps, selling into a recession can experience. So first off an economy that’s in recession can bring a whole bunch of new challenges for sales reps and sales managers. First of all, desperate competitors doing desperate things. A lot of companies are really hurting and they’re really willing to do things they would never have done before. So things like deep discounting liquidating their inventory to make ends, meet, giving away free consulting, or other low costs, but valuable things that are all structured to be given away, to steal your customers away from you.
Second new challenges from your prospects and your customers that you may experience like resistance from customers that wasn’t there before. Not wanting to engage. I want to learn about your product, not wanting to meet with you, et cetera, resistance to spending money spending freezes can often come from the very top. You’re also going to have to watch out for aggressive procurement offices who are looking to leverage the down economy for discounts, better terms, and generally are going to try to jam down your margins.
So what can you do about these things? What can sales managers do to help their reps protect the margin and keep sales up in a bad economy? First, then you can, you can shove in the sword with some negotiation training, refocus on communicating the benefits and the value that your prospects will receive if they purchase your product, make sure that the value is really understandable in terms of the actual dollars that you customer will get to keep or will make. In addition, if they purchase your product or service, you want to show the ROI and you want to give your sponsor the ability to easily communicate that value up the chain to loosen those purse strings.
Another thing you can look for is, as a Manager, you can look to make some changes to the comp plan structure. If you have a product with tightening margins, for example, or in general need to defend your margins in these times, and your reps are currently comped on revenue, you can consider switching it to comping them on profit margin. The reason you do this is that for example, if your profit margins are 30% and your rep gives away a 15% discount, you actually need two deals of that original size to be worth as much as the deal would have been at fluid at full price. But if you align your reps comp plan with a profit, instead of with revenue, then you’re able to, well with revenue that 15% discount only cost them 15% of their commission. But if you’re aligned to profit that 15% discount just cost them half their commission, if there’s a 30% margin. So if you align your reps with the company’s goals, they’ll defend the margins better. And so align the comp plan with the profit line instead of the revenue line.
Scott Ingram: I’ll have part two of Steve’s tip next week, so make sure you’re subscribed to the podcast so you don’t miss that and for links to Steve’s LinkedIn profile, Badger Maps, The Outside Sales Talk podcast and the Sales Hall of Fame, just click over to DailySales.Tips/765, and finally for those of you who’ve been following my Texas disaster saga we finally got running water back late Sunday morning. We still have to boil our water, but turns out being able to take showers and flush toilets is a big deal.
Anyway, be sure to come back tomorrow for another great sales tip. Thanks for listening!