Pricing Leadership

In recent years, segment specific price guidance has proven to be a very successful way of introducing pricing optimization processes in the industries where price optimization is relatively new, such as manufacturing and distribution. By product group and customer segment, the sales agents are provided with meaningful reference prices that will allow them to price their deals appropriately and quickly. Especially when the set of products is large and markets are volatile, this approach is very valuable, even for experienced agents.

Would you ever use the same analytic tools to segment your agents? Many companies are leary of associating a pricing tool with the performance measurement of sales agents for good reason: this can be a major stumbling block for the sales adoption of the tool. Nevertheless, in many cases it can really pay to segment your sales agents.

Not all sales agents are equal. There are always a couple of agents that are outstanding, making many more deals than the average sales agent. When walking through a call center, you will see them juggling three or four phones while making very profitable deals. In jeans and coffee stained t-shirts, these agents may not be as glamorous as Wall Street brokers, but their skills are similar and it does not take much data analysis to figure out that these outstanding sales agents can easily earn multiple times of what a pricing consultant makes.  Why are these agents so successful? Is it the type of customers they serve, do they have special contacts? The truth of the matter is that in the vast majority of cases these people are simply very good at what they are doing.

Other sales agents are often trying to learn from these experts, taking some of their time to discuss important deals. Wouldn’t it be great if there was a more efficient way to communicate the information that these experts have? There actually is a way of doing this: by filtering out the deals and proposals of the novices and by giving more weight to the deals of the experienced outperformers, price guidance will quickly show novices and average sales agents what prices and discount experts have been able to ask recently by product group and customer segment.

The value of this approach is tremendous and there is a direct effect because novices will generally avoid some of the major mistakes they would have made otherwise. The secondary effect is that the number of sales agents that succeed – i.e. manages to make enough deals to make it worth their while – increases significantly. The cost of hiring and training new sales agents is significant, and these costs will be reduced in some cases by a factor of two or three. And of course there is the additional benefit of seeing more successful people on the work floor and in the call center. The effect of shared success is priceless.