No, we’re not being sexist! This was a term that a client used recently to describe today’s sales environment:
Panic
Mode
Selling
Throughout their marketplace they are seeing distributors quoting projects at minimal margins and manufacturers providing pricing that is below what they ever thought they would receive (or see), and then someone matching, or beating, it.
As someone mention in a comment on Tuesday’s posting, “we have trained our customers to ‘let’s make a deal’, and manufacturers and reps are also guilty of playing the game. The backbone to say “no” has been turned to mush.
The question then becomes, “what can I do?”
In some cases you need to fight fire with fire, especially versus distributors who want to be the price leader. But this doesn’t have to represent a significant percentage of your business (but it does need to be managed by someone who has profit responsibility for the branch / company!)
Balance it out with:
- Reinforcing sales and sales management skills
- Focusing on new products
- Offering special pricing for limited time and sometimes extracting concessions from customers
- Unbundling your pricing and ask your customer what “services” they would like to buy
- Conducting some ABC analysis on your customers and sharing it with your salespeople and selected customers.
- Considering altering your sales compensation program to reflect the new business environment
- Creatively bundling products and pricing for packages
- Promote your overall services and applications
- Pursue niche markets or other customers so you are not dependent on a few customers or markets
Your objective is to maximize your share AND your margin dollars. Profitable pricing, efficient processes customer insight and value-driven marketing can get you there.
How are you competing against margin deterioration / price erosion? Also, take our survey to share your thoughts (anonymously) and we’ll post results next week (distributors only).
2 Comments
Great article, guys! I was discussing this very thing with a good distributor of ours last week – we just didn’t know to call it PMS.
Here a quick thought that I believe we all need to keep in the back of our heads.
With current economic conditions, the suppliers have trimmed back their sales teams to the bare minimum. Distributor salespeople face the task of maintaining their existing accounts and covering accounts which may have been serviced by others – prior to Reductions in Force.
This means what ever price errosion we face today is probably driven by procurement people at existing accounts. As soon as the industry regains confidence and a few new sales guys are added to the mix, we will see a gigantic round of price/margin pressure.
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