Seven Ways Leading B2B Companies Are Arming Their · PDF fileglobal competition, today’s...

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S E L L I N G B R E W R E S E A R C H R E P O R T

Seven Ways Leading B2B Companies Are Arming Their Sales Teams to Protect Value and Margins When

Dealing with Today’s Savvy Business Buyers

Whether negotiating a multi-year contract or quoting a routine order over the phone, everything comes to a head when a buyer is asked to agree to a price.

All of your product, marketing, and sales efforts have been leading up to this one decision. And the buyer’s decision at this point determines:

1. How well you’ll actually be compensated for all of your company’s efforts, or...

2. Whether you’re even going to be compensated at all.

As such, this salesperson-to-buyer interaction is very likely the single most powerful point of leverage in your entire business.

Of course, leverage is a double-edged sword...one that can swing in either direction.

SOURCES: SellingBrew SalesPulse and PricingBrew PricingPulse Studies © Copyright MindBrew • May not be used or reproduced without permission.

The Most Powerful Point of Leverage Is at the Point of Sale

The most obvious impacts of price negotiations are to the top-line. We all recognize how losing deals will hurt our revenue numbers. And we also realize that losing deals often means we’re losing customers.

But while the implications of losing are fairly clear, far less understood are the implications of giving up too much in the interest of winning.

For example, a price concession of 10% may seem trivial compared to a deal’s revenue. But for certain types of businesses, a 10% discount gives away nearly 50% of the margin!

And when we give up too much in order to acquire a new customer, we often set a precedent for all of our future dealings—effectively destroying the potential we found so appealing in the first place.


Outcomes at the Point of Sale Have Deep Implications

SALES REVENUE

PROFIT MARGIN

LIFETIME VALUE

When it comes to negotiating deals and quoting prices, B2B companies often seem to take it for granted that their sales teams are capable of holding their own and maintaining the balance of power.

Companies will just assume, for example, that their salespeople are inherently good negotiators and deal-makers. Though there’s a big difference between sales skills and negotiation skills, the assumption that they are somehow linked is quite common nevertheless.

Companies that do acknowledge potential deficiencies in the field will often view their bid desk and contracts people as preventative “backstops”—even though their skills and knowledge in the areas of pricing and negotiation may be equally lacking.


Companies Think Their Teams Are Up to the Challenge

At SellingBrew, we interact with thousands of B2B sales operations in dozens of different verticals. And through our research, it’s become very clear to us that the balance of power isn’t balanced at all.

Today’s business buyer is armed with more information than ever before. And with the increases in global competition, today’s buyers also have many more options.

But what has really turned the tables over the last decade is the rise of Procurement.

Today, your salespeople are likely squaring-off against “Procurement Professionals” who’ve been trained in negotiations, armed with dozens of tactics and tricks for extracting concessions, and compensated based on cost savings.


Most Teams Are Really Outmatched and Unprepared

From our vantage point, we see two trends that suggest the situation is destined to get even worse:

In a SellingBrew study, 76% of B2B sales operations reported that their quotas were increasing. In the same study, only 24% indicated they were very confident in their ability to hit those higher quotas.

At the same time, buyers have seen their investments in Procurement pay off and are working to enhance their purchasing capabilities and practices even more—more tools, training, veto power, etc.

Sellers are under ever-increasing pressure to close deals. Buyers are becoming even more proficient at extracting concessions. Together, these trends indicate that margins and profits will be crushed.


The Situation Is Only Going to Get Worse Over Time

INCREASING SALES QUOTAS

INCREASING BUYER SKILLS

Of course, leading B2B companies aren’t about to just throw up their hands, give up, and give away their margins and profits.

They’ve acknowledged the changes that have occurred, identified the gaps and deficiencies that exist, and are now taking proactive steps to shift the balance of power.

In our research, we’ve identified seven of the strategies and tactics companies are using to strengthen their sales teams’ quoting, pricing, and negotiating capabilities.

The rest of this report will explain these seven approaches in greater detail. Since each approach differs in its application and performance, we’ll also provide our analysis and recommendations along the way.


Seven Innovative Approaches for Shifting the Power

Sure, everyone talks a great game about value. But how many actually do the homework to build a solid, credible value case? Not enough.

This approach is about getting the product and marketing groups to perform the customer research and competitive analysis that underpins a strong differential value story.

A strong value story...one that the reps themselves believe...provides a great deal of confidence to hold the line in tough negotiations, knowing that your solutions are worth it.

From our perspective, this is a no-brainer. Yes, it takes time to do the homework. But it’s not difficult to do. And frankly, this is work that should have been done before the product was even introduced!


PROVEN APPROACH #1:

Doing the Value Case Homework

It’s easy to forget what negotiation is really all about. We get caught up in the haggling and forget that it’s about trading—trading something of value (your products or services) for something else of value (money).

This approach is about developing an organizational habit of making trade-offs. Here, companies are setting an expectation that price concessions necessarily mean that something else of value is stripped away from the deal.

Of course, setting the expectation is one thing. And we believe it’s a good thing. But to ensure the trade-offs are actually possible, your offerings have to be structured in such a way that elements can be taken away.

As such, this strategy isn’t entirely practical for everyone.


PROVEN APPROACH #2:

Encouraging and Enabling Trade-Offs

Did you know that research has shown that only about 30% of the buyers in a typical B2B market are true price buyers?

So while it seems like every buyer says they are only interested in the lowest price, up to 70% of them are actually bluffing!

This approach is about teaching the sales organization to identify price, value, and relationship buyers. It’s about teaching salespeople how to recognize a value or relationship buyer who’s really just pretending to be a price buyer.

We’re fans of this approach. The basic framework is easy to grasp and operationalize, and it gives your salespeople the confidence to deal with phony pricing pressure.


PROVEN APPROACH #3:

Identifying Buyers That Are Bluffing

Even seasoned salespeople will begin to calculate discounts when they hear that Procurement might be getting involved in a deal.

Recognizing that salespeople often fall for Procurement’s tactics out of ignorance, this approach is about “demystifying” the game.

Once salespeople understand what Procurement’s goals are, why they do what they do, and the tricks and tactics they employ, much of the uncertainty and fear evaporates.

It’s like revealing how a magic trick works...once you know, the trick loses all of its power.

Given the increased presence of Procurement in buying decisions, we feel that this type of training isn’t optional anymore.


PROVEN APPROACH #4:

Exposing the Tricks of Procurement

How many of your salespeople and managers have had formal training in negotiation? If your company is like most, your Procurement people are the only ones who have received any negotiation training!

This approach is about developing or sourcing a negotiation “module” to include in your sales training curriculum, and making it required for anyone involved in deals.

While we absolutely agree with this approach, we recommend taking it a few steps further...

While retooling your sales training program to include a negotiation module, why not include some of the other approaches in this report at the same time—Procurement tricks, identifying buyer types, making value tradeoffs, etc.?


PROVEN APPROACH #5:

Including Training on Negotiation

This approach is about displaying, at the point of sale, how similar deals have been priced. It almost seems too simple to be effective, but this approach is actually one of the most powerful.

Unlike training, which may or may not stick, this is systematic. It’s an “always on” part of the machine.

It’s highly intuitive. One glance at that chart and you instantly know whether your deal is good or bad.

It’s data-driven and leverages peer pressure. Rather than just opinions, these are deals that a salesperson’s peers have actually closed. And they won’t want to be the outlier!

This approach has everything we like...it’s simple, scalable, intuitive, data-driven, and quite effective.


PROVEN APPROACH #6:

Enabling Simple Deal Comparisons

What if you could show your sales team the prices buyers are really willing to pay? What if salespeople had buyers’ real walkaway prices in their back pockets? Impossible?

Today, through price optimization tools, B2B companies are providing their salespeople with these game-changing buyer insights.

In our assessment, leveraging price optimization represents the height of best practice in negotiation and quoting guidance. Knowing what buyers are willing to pay addresses a number of other approaches we’ve highlighted, including negotiation skills, procurement tricks, bluffing buyers, and deal comparisons.

In our view, willingness-to-pay is the single most-powerful insight for shifting the balance of power.


PROVEN APPROACH #7:

Leveraging Price Optimization Tools

He’s pushing for $8000...but he’s

actually willing to pay $9250.


Comparing the Seven Approaches Doing the research and analysis to strengthen the value case.

Expecting and enabling value takeaways w/price concessions.

Teaching salespeople how to identify different buyer types.

Exposing the tricks and tactics that Procurement people use.

Developing a required training module around negotiation.

Enabling simple comparisons to other similar deals at POS.

Using price optimization to determine walkaway prices.

1

2

3

4

5

6

7 LOW

HIGH

HIGH

TIME / EFFORT / EXPENSE

BENE

FIT /

VALU

E / IM

PACT

7

6

5

4 3

2

1

The balance of power in quoting and negotiations has clearly shifted in the buyers’ favor. And the trends certainly don’t bode well for the profitability of future interactions between buyers and sellers.

But acknowledging the realities of the situation doesn’t mean you have to wallow in them.

In this report, we’ve highlighted seven approaches other companies are using right now. Some are more effective than others. Some require more time, effort, and investment than others. Some will work best in combination, while others will work well on their own.

So, there are things you can do to shift the balance of power...you just have to decide to do them.


Shift the Balance of Power By Taking Decisive Action

To further the advancement of best practices and innovation across the global business community, free distribution of this

research report has been generously underwritten by:


http://www.pros.com/solutions/sales-effectiveness/negotiation-guidance/?utm_source=3rd-party-website&utm_medium=referral&utm_campaign=WS-MindBrew-Selling

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