Monday, January 20, 2014

6 Bad Sales Pricing Practices You Must Avoid

Whether you realize it, you most likely have salespeople who are cutting your company’s profits and doing it with a smile on their face. 
Read a few of these confessions.  Names have been left out to protect the guilty, but they’re all real, as I’ve experienced each and every one. Worst of all, I’ve experienced them from a wide number of companies.  Worse yet is how clueless the sales management was when I called their attention to the issue. 

Confessions of a Salesperson:

1. We all want to be recognized

 At the start of each sales meeting, my manager calls out the success of each salesperson. We all like to be recognized, especially because senior management is in the meeting too.  What is interesting is there is never anything said about the price or profit.  My manager is excited about the size of the order.  It didn’t take me long to figure out it would be in my interest to cut a price or offer something for free as a way of closing a sale.  If the recognition is on the sale, I will do whatever it takes to get it. Price and profit are simply not important.

2. The yelling sales manager

My sales manager comes unglued anytime I can’t close a sale.  It’s amazing how ballistic he goes when I call him to let him know a customer didn’t buy.  First thing he does after yelling at me is to then start threatening how he is going to take other customers away from me.  After having experienced his wrath a couple of times, I figured the way around it was to get marketing to offer me better pricing.  Sure, I would tell them I hoped not to use it, but there was no way I wasn’t going to use it. Closing the sale at a discount saved me from getting chewed out.

4. Gaming the accounting system

It’s amazing how messed up my company’s accounting system is.  It’s so bad there is no way for them to track accurately revenue and profit by customer, so we in sales argued years ago that our bonus should be based solely on volume.  This is so sweet for us in sales. For us, it means, “Sell baby sell!”  Objective is the volume, not the price or the profit.  I hope the company never gets the computer system working right. If they did, we’d be screwed!  It’s far easier to sell when we don’t have to be worried about price.

5. Changing the invoice

Our accounting department is not very sharp. It seems their objective is to get stuff off of their desk as fast as possible.  A few years ago, I noticed how I got paid full commission on a price the customer ultimately didn’t pay.  What I realized is as long as I put into the order system the full-price, I would get paid the full commission.  My company thought they were smart by paying based on price/profit, but they would only look at it at the time of the order. 

After the order was processed, I would go back into the system and change the price.  Since there is a delay in the time between when the order is first processed and when it is ultimately shipped, on the generated invoice the customer would only see the lower price.  Beautiful thing for me is although the customer is getting a discount, I’m getting full commission!  

6. Deductions are worth it

I know accounting hates me, but it’s worth it.  When I can’t get a sale due to price, I simply tell the customer they’ll get the lower price they’re looking for.  I tell them when the invoice comes to ignore the stated amount and simply pay the price we agreed on.  What is so funny is it takes several months for the deduction to float through the system.  I head the situation off by telling the customer to ignore any correspondence they get on the shorted amount. After that I call accounting and give them some garbage about how upset the customer is and they’re threatening to not do any business with us again.  It’s amazing, but it works!  Accounting gets scared their actions are going to result in a lost customer and poof, the entire issue just goes away.  I get the sale and I get the full commission!

Yes, these bad sales practices happen and it happens far more than anyone can imagine

 I’m not trying to bash salespeople, but I’m being blunt. They will find a way around any obstacle that stands in their way of making more commission.  You may find these as being unethical and I will agree with you, but unethical or not, it is still resulting in lost profit to you and your company. By learning about the bad sales practices, you can turn it around and ensure your sales team does it right.