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One Deceptively Simple Trick for Boosting Your Margins

In Identifying and Capturing Profitable “Quick Wins”, we explain 15 strategies and tactics for boosting margin dollars without a investing a lot of time or money. One of the strategies discussed in the training session is deceptively simple and almost seems too easy:

Remind your salespeople why they shouldn’t be “rounding down” the prices they’re quoting.

Now, before you dismiss this strategy as being too rudimentary and basic to be very effective, consider the underlying dichotomy it addresses…

On one hand, as pricing professionals, we’re extremely protective about every nickel and dime of price…because we’re acutely aware of just how much impact those nickels and dimes can have on the bottom line.

On the other hand, our salespeople will often readily round off or give away nickels and dimes of price…because to them, those nickels and dimes just seem so inconsequential relative to the top line.

As pricing professionals, we understand the waterfall intimately. We know what a dollar in revenue typically means in terms of gross margin. And, we know what a dollar in gross margin typically means in terms of net profit.

So naturally, we know what a dime in price could mean to the bottom line. As pricing professionals, we can’t help it—we have the basic waterfall formula embedded in our brains!

But do our salespeople understand these dynamics, too?

Do our salespeople really know why a nickel or dime in price is actually a big deal? Do they really understand how top-line revenue dollars turn into bottom-line pennies as they cascade through our cost structure?

Or are we just assuming that they know?

The point is that when our salespeople give away nickels and dimes, it may not be due to ineptitude or nonchalance on their part. It may simply be a matter of having a different reference in mind, and lacking specific knowledge as to how revenues translate into profits.

And in that case, a little reminder…plus a little education…can go a long way.

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