Business Artikel

Sales Eye - The price is right! (Feb 16th, 2004)



The price is right!

16th February 2004


What happens on the currency markets, and in particular the złoty/euro relationship, can have a huge impact on the sales force, and that's what we're here to talk about today.


"The złoty rebounded from all-time lows versus the euro on Friday... but the market was still nervous and any negative news may prompt selling again. The currency was hit on Thursday on worries that the minority government's spending cut plans would be watered down in parliament"

WBJ, February 9, 2004


Wait a minute! This is an article on sales - what's going on? Should Zbigniew Piekarski from Investor Eye be concerned? Are the Lynch brothers expanding their journalistic empire?


Don't worry Zbyszek - we're happy to write about sales, and we have no ambitions to become financial authors (thank God). However, what happens on the currency markets, and in particular the złoty/euro relationship, can have a huge impact on the sales force, and that's what we're here to talk about today.


Actually, our topic for today is pricing - and how to handle price increases. If your company sells a product that is imported, or its components are priced in euros, then you know what we're talking about. Since the middle of last year, the euro has strengthened considerably against the złoty - by as much as 17 percent. And for importers and manufacturers with euro-based costs, that means price increases.


Normally, price increases are a fact of life. Poles for years have gotten used to the fact that every January energy prices surge, as do those for water, gas, bread, and a long list of other commodities and services. However, over the past several years, we've experienced an opposite trend - prices have actually decreased for many products. Computers, telephones, Internet services, hotel rooms, cars... the list goes on and on.


And that's the problem. Many customers - especially corporate customers - have actually gotten used to price decreases. Your sales reps have been able to sell in recent years thanks to ever-competitive prices. Sure, clients always beat you over the head for discounts in Poland but, in general, price increases had become a thing of the past.


Until now, that is. Because your sales reps have not had much practice dealing with price increases, they have likely become rusty regarding how to sell such increases to clients without panicking. Below is a short list of pointers for your sales force and management on how to prepare your sales team, and clients, for the inevitable price increases that many businesses will be facing.


Just the facts, ma'am
The grounds for any price increases should be based on the facts. Have your suppliers increased their prices? If so, by how much? Chances are your competition is facing the same issues that you are, and will have to follow suit to stay in business. Clients understand that we aren't in business to give our products or services away - after all, unless your client is the government, they are selling something too.


Highlight the features and benefits

Features and benefits again! Price is important, but it ain't everything. If it were, then everyone would be driving a Mały Fiat and sleeping in hostels. The Mercedes and Marriott's of the world would have to close their doors. The lowest cost solution is not always the best option, you need to highlight the benefits and focus on all the needs of your client.


Increase the value

It doesn't take much to add value to your offer. Sales people add value by offering superior service. Your company can do many things to increase the value, such as offer better payment terms, faster delivery, quantity discounts; but the best thing you can do is ask questions, and understand what the priority is. Rarely will a client complain about price after an order is signed, but if the quality of the service after the order is not up to par, then they will start talking to your competitors.


Get some financial training

Most salespeople are not financial wizards; in fact, many don't know the difference between a margin and a mark-up. If this is the case, then have your sales force spend some time with your finance department. Coach the finance team on how to explain things in laymans' terms, to people that don't have an economics degree from The Wharton School.


One of our newer account reps assumed that we worked on 100 percent margins. He came from the retail industry, where that type of margin is commonplace, and so had no idea that distributors and sportswear manufacturers actually work on much lower margins than retailers. Don't assume your sales people know your margins.


Take the time to understand the currency exchanges. Know where your products come from, and what currency you buy in. You can make comparisons between the price six months ago versus now, based on what the euro price was, and show that in fact it was not a very big increase at all. You need to understand the impact of currency fluctuations, so you can explain how it relates to your products. An educated sales rep is a convincing sales rep.


Sales force buy-in

Get your sales team to buy in to the increase, and explain the reasons to them. If they aren't buying it, then there is no way they can 'sell' it to your clients.


In your sales meetings, list some of the objections that clients will have, and brainstorm the best way to answer them. If not, we guarantee you will have sales people telling clients, "It's not my fault, they raised the prices." By role-playing this process, the entire team benefits by seeing the best and worst ways to help communicate the message. Remember, a sales person who can only sell if he or she has the lowest price is not a sales person, but an order-taker.


Execution and follow up

If you know a price increase is coming then it helps to prepare your customers as well, in advance. Simply waking up on March 1, and announcing a price increase of 10 percent will not make customers happy. Sometimes, announcing in writing that a price increase will be taking place one month from now will allow clients to get their orders in earlier to beat the increase. Once the increase has been performed, you need to monitor the response.


Remember, the price increase that you are taking because of rising costs or devaluing currency does not increase your margin - it is simply passing along your increased costs to the consumer. Therefore, if you want to maintain your previous profits, you cannot afford to lose volume. A drop in volume resulting from a cost-driven price increase results in less money. And that's bad news for everyone; the company and the sales rep.


From Warsaw Business Journal by John Lynch, Matt Lynch -"The Sales Brothers"