1.Situation
Discount policy, special offers and commercial conditions, price positioning, customer benefits related to products, services and payment facilities sum up the most important commercial vectors.
As commercial manager, how do you react when your sales agents come from the field and tell you that there are competitive offers in the market that far exceed the commercial conditions your company is able to provide on the market?
In MYPRODUCT36 I detailed how I adapted in 2014 the Veteco’s commercial policy to deal with a much wider and aggressive competition, including the commercial offers and discounts “thrown” on the market, switching from commercial policy based on monthly offers to annual contracts based on quarterly / yearly targets.
2.Task
Prices represent another dimension of commercial war, a thorny problem when customers get used to filtering direct competing products primarily in price, giving less attention to the benefits of each of these products.
Frontline Combo and Frontline anti parasites defined super premium and premium products both in terms of quality and price positioning, being significantly more expensive than Advantix (Bayer) or generic products.
In this context, how did the Veteco commercial team address the price issue in relation to the competition?
2.Action
As Commercial Director in Veteco I implemented three distinct actions to support the commercial team to be able to cope with the commercial war.
A.The price reflects the benefits of the products
Knowing own products and competition products in the smallest details was a permanent goal for the sales team. By using trainings on the medical professional area, the salesperson’s speech was permanently professionalized in order to convince our clients that original formulas bring superior benefits comparing with the competitive products.
B.Presentations and specialized discussions on price issues
I present only two models approached with the sales team in the workshops on price issues.
| Perceived Quality | Price |
| Less for | Less |
| Same for | Less |
| More for | Same |
| More for | More |
| More for | Less |
Who understands this simple representation of quality-price comparisons can find the winning formula to combat price objections.
But what is the price? Is it number, risk, justification, currency, value, reference, agreement etc? If we are aware that the price is more than these aspects then there are strategies and approaches for price positioning and communication that go beyond the barriers to direct comparison between different price offers.
Here are some examples:
-Psychological price – 49.99 ron
-Higher results – X ron car makes 1000km
–Price justification – price includes product, shipping, assembly, potential replacement etc.
-Redefine competition – 10% of the coffee price from the restaurant; this product cleans better than 3 competing products that deliver the same result
-Underlying risks – with low cost flight you risk to wait 2 days in the airport
-Potential sacrifices – a good night’s sleep only for 1 ron per night
– Change Unit of Measure – pack of 3 pipettes instead of 1 pipette
-Focus on difference – only 1 leu difference to drink a special Christmas coffee
-Underline areas where customers do not want to pay less – the Apple universe
-Change the reference – 10 ron hot dog’s introduction to make the 3-5 ron price looking more acceptable.
C.Price-Discount Formula
The Price-Discount formula is a working tool created for first time in Veteco, a tool that sales agents used intensively to convince customers that by working with our products and offers they reach superior results including financial results vs competitive products and offers.
It is a xls model that is easy to use and generates in few seconds comparisons between promotional offers (value, units), profit, number of clients and number of days in which the profit is reached, break even rate etc.
I will come back with a detailed article on this subject.
4.Results
The commercial battle on prices, discounts and payment terms was lost from the start if the company’s position would have only considered these aspects.
The permanent professionalization of the sales representatives and their arming with all the tools necessary to cope in the commercial war is a defining dimension as their sales activity to be productive.
Obviously, this is not the only one. Brand consolidation, operational excellence, product portfolio quality have also contributed to the positive dynamics that the company followed in an increasingly competitive market.
5.Key Leanings
Whether you are a commercial manager, a marketing manager or a simple sales representative, the issue of prices and discounts needs to be deepened by dedicated tools, discussions and specializations.
Who succeeds in overcoming direct objections to prices and discounts becomes a very good salesman.
Notification: MYPRODUCT reflects my real professional experience and expertise as well as my subjectivity. I do have a profound respect for all the companies I collaborated to and for all the people I worked with. It is not my intention to approach any sensitive, confidential or offending information related to companies, projects or people. If you the reader deduct or recognise companies, projects or people in my examples, I kindly ask you to respect MYPRODUCT and my professional and ethic approach and to not share any detail, information, situation, name, company.