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T h e C h i e f S a l e s O f f i c e r |
What is discounting really costing you?
Quantifying Discounting |
Think about this...
It's the end of the month, your numbers are not where you would like for them to be and one of your salespeople rushes into your office. "Boss," they yell, "here is a really great sale - all we need to do is give the client eight points off and they will give us the order right now. The competition is in there at fifteen percent off of our price, but the client says they will buy from us if we will just meet them half way!"
What do you do?
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What is the real cost of discounting?
We've all been there. It's the end of the month or the quarter and the numbers we need are just not on the books. Any sale would be a real benefit - or so we think. What is the real cost of discounting? Here are some things to consider - |
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Customers talk. Discount for one and, sooner or later, the others will hear about it. Then what? Price integrity is gone, of course. Any explanation given to the other customers needs to be well thought out - and probably worthy of the Nobel Prize in Literature!
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Salespeople talk. When we allow one salesperson to discount for one customer, we may actually be lowering our prices across the board! The easiest way to sell is on price and many salespeople will gladly accept a price reduction as a sales tool.
The most important reason for not discounting is the impact it will have on your profits, your bottom line. Remember:
Discounting brings a disproportionate impact on profits.
A slight drop in revenue (sales price) can bring a significant impact on profits. How significant? Let's use a calculator!
If your salespeople are compensated on profits - like business owners and publicly-held corporation officers are - they would be less inclined to discount. This would be especially true if they could quantify the impact discounting would have on their income.
 So we built a calculator to show precisely what discounting can do to your bottom line. The tool is designed to be used by a salesperson who is compensated on MARGIN, not revenue. Simply enter the basic data and let the tool do the rest.
You will see:
- How many additional sales you will need to make to recover the lost profit from this one sale
- How large the commission would have been without the discount
- How much income was lost by the salesperson
SAMPLE: (Actual client) Use these inputs as one of our clients did:
- Gross Margin: 42%
- Price Reduction: 15%
- Original price quoted: $233,000
- Salesperson's commission: 25% of gross margin
You will see why the salesperson wanted to find a new approach rather than sell on price! Click on the image above or the link below:
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Archives Now Available |
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You Asked For It -
Okay, maybe not you, specifically - but your fellow readers did. Here is what happened; in August of 2007, using the older format, I sent out an Ezine entitled "No More Winners". It addresses the differences in winners and champions. At the time, it was the most circulated edition I had ever published. Little did I know that the SuperBowl in 2008 would be a replay of that issue! Several CSO's, CEO's, speakers (I hope they gave me credit!) and others used it and they tell me it was very effective.
So, from now on, there will be an "Archives" link at the bottom of these ezines. |
