Over the years, I’ve often referred to pricing as the “third rail” of performance improvement in B2B environments.
Of course, the analogy refers to the high-voltage third rail that provides power to an electric train. And it’s always seemed to me that a lot of companies avoid tackling their pricing for the very same reasons people avoid getting anywhere near the third rail in the subway—i.e. they recognize the power, but they’re terrified of getting fried.
When I consulted for companies like these, everything else was fair game for modification or reengineering—sales processes, product development, marketing approaches, even the business model itself. But when it came time to focus on their pricing, the management team’s eyes would get saucer-wide and I could almost hear the little voices inside their heads screaming, “Stop! You maniac! Don’t touch that!”
Now, if you’re reading this article it’s likely that your company has already gotten past the irrational fears and jumped over the third rail to focus more attention on pricing. But are you prepared to jump over the second third rail of pricing improvement?
That’s right…there’s another one. It’s extremely powerful. And it’s so scary to cross that it keeps a lot of pricing teams from realizing their full potential.
The truth is that there are very few things with as much negative impact on pricing performance as a sales compensation structure based solely on revenue. At best, a revenue-based sales comp scheme will have a significant dampening effect on everything you do from a pricing perspective. And at worst, it will undermine your entire pricing program and make your efforts nothing more than an extremely visible exercise in futility.
Of course, this probably isn’t news to you. You’re likely already keenly aware of how your sales incentives are working against your pricing initiatives. And because it seems so onerous and fraught with conflict, you’ve probably been putting off actually doing something to correct the situation.
It’s scary, I know…but you have to take the leap. It’s just too powerful to ignore. You should be smart about it, certainly. You should proceed slowly and not try to change too much all at once. And, of course, you should learn all you can from those who’ve already done it.
At some point in the past, someone at your company took a big leap over a third rail to focus on pricing in the first place. Now it’s your turn—because chasing pricing improvement with a revenue-based sales comp structure is like driving around with the parking brake on.
Revamping Sales Comp to Improve Pricing
In this on-demand webinar, you'll learn about the pros and cons of various approaches for infusing pricing performance into your sales compensation plan to reduce unnecessary discounting and boost profitability.
Tackling Sales Comp to Drive Pricing Excellence
In this expert interview, Bob Vezeau, the Vice President of Strategic Pricing at WestRock, discusses his experiences redesigning the company's sales compensation platform to better align with pricing excellence.
How to Avoid Sales Compensation Gotchas
While no variable comp approach is ever perfect, you stand a much better chance when you minimize the unintended consequences. This guide exposes the problems with various schemes and explores potential solutions.
