Last month, we wrote about preparing yourself before presenting a price increase to a customer. We also discussed how to be prepared to get “your price” when presenting new items. Deone Johnson, vice president of sales at Brissman–Kennedy in St. Paul, Minn., shared some of his thoughts about how to set the proper price.

I pointed out that attitude and preparation are of the utmost importance and that not getting “your price” will cost you money right out of your own pocket.

Deone and I continued our discussion regarding managing price increases and gross profit margins, and here are some additional thoughts that should prove helpful to sales management and sales representatives alike.

Even though we are supposed to be in a tight economy and low inflation, Deone tells me that he is given price increases almost every day by various vendors.

So one important part of managing prices is to notify the sales force at the first hint of an increase. Many times, prices have to be presented in advance of purchasing, and if you don’t quote the price that will be in effect at the time of purchase, it will cost you money.

Some vendors talk a lot about increasing their prices (just like the airlines), but it doesn’t always happen, so do some research before you jump to any conclusions.

Know what your competitors are doing with their prices. There are several ways to figure out the prices of products sold by your competitors, whether they are distributors or manufacturers.

What about prices of products that you sell that may be available on the Internet? You or someone in your organization should be checking on this regularly.

If you have customer service people that work on the phone taking orders and quoting prices, you should be communicating closely with them. Be sure that you furnish them with prices that are in existence on current accounts and any new price quotes that you are generating. What is your policy about customer service people quoting prices to a customer that calls in asking for prices? This may be a new account or it may be a current account asking for prices on a new item? What is the price to quote? Do you have a policy that covers this issue?

Prices are affected by whether you are a selling a commodity, a product line also sold by numerous competitors in your area, or a product sold exclusively by your organization. It’s up to you to decide which product line will generate a fair income to you and which ones are just taking up your time and not paying their way.

Products or accounts that require additional service (custodial training, in-service sessions or additional repair on equipment, for instance) should generate more income for you to justify the additional time required.

An account review that looks at gross profit margins should be conducted by sales management and by individual sales reps at least every quarter — better yet, every month. Low or marginal profit accounts and individual products must be examined and either margins be raised or you must reduce the time you spend in these areas. The time saved can be invested on accounts and or products (new or old) that will pay their way.

Here’s a question that Deone brought up. As a manager, what is your strategy in working with new sales reps with respect to pricing? You certainly don’t want to train or encourage your new sales rep to go out and “meet or beat” your competitor’s price. On the other hand, we know that the “old pro” buyer will test a new rep by asking for price quotes on commodity products. If you don’t discuss this issue or have a plan, your new rep will either sell a lot of products at no profit or probably get shot down on his first call or two by quoting high prices on commodity items.

There are several ways to approach this entire price issue, but we believe that good selling skills and the “right product line” will go along way in solving this dilemma.

Many manufacturers and distributors have great programs that will help new and veteran salespeople sell their products at excellent margins. These include cost-analysis forms, time studies, leasing programs and training programs to complement each of these items.

Deone and I agreed that investing time as a manager, and as individual salespeople, on this very important part of your business will pay tremendous dividends. We would like to ask you to share your thoughts regarding managing prices and profits.

To share your selling ideas, fax: (414) 228-1134, contact Mr. Dixon at (877) 379-3566 or e-mail questions or comments regarding this article.

To discuss this topic with your peers, please visit our Forums.




POSTED ON: 9/1/2002