While serious pricing problems can seemingly pop up overnight, that’s not how it happens in most cases. In most business environments, things tend to deteriorate gradually over time. Margins start slipping a bit here. Discounting creeps up a bit there. A few more “special deals” start appearing in the workflow.
In the moment, none of these things will seem particularly catastrophic on their own. And because these signals tend to emerge slowly, they’re pretty easy to rationalize or ignore completely.
Meanwhile, the underlying pricing system is quietly eroding. And by the time the problems become too big to explain away, a lot of damage has been done.
The good news is that if we’re vigilant and responsive when certain early warning signs begin to manifest, we can take corrective actions long before the underlying issues can metastasize into full-blown crises…
WARNING — Exceptions Are Breaking Out
Even in healthy pricing environments, it’s perfectly normal to have some pricing exceptions. After all, no pricing structure could anticipate every unique competitive situation, customer nuance, or deal dynamic. And we can even expect some degree of variability in the rate of exceptions as market conditions fluctuate over time.
But when our exception rates break out of their “normal” or expected ranges of variability, it’s often an early indication of deeper issues…
Our pricing structure may no longer reflect competitive realities. Our segmentation fences and boundaries may have gotten fuzzy. Our newest sales reps may lack the necessary negotiation skills to push back. Or maybe it’s just easier for certain reps to shift the deal-making burden…and any “bad cop” blowback…to the deal desk.
Now…when this signal begins to flicker, just figuring out how to handle the increased volume is not the answer. Instead, we need to diagnose the root causes of the exception spikes and eliminate them.
WARNING — Discounts Become the Opener
While discounts exist in most sales operations, they’re not the main event. Or at least, they shouldn’t be. Competent sales reps will lead with value, differentiation, relevance, ease of doing business, and good old-fashioned rapport. Their goal is to build a compelling case for why the offering is worth the price that’s being asked.
Discounts tend to be kept in the back pocket. They’re used sparingly as timing sweeteners or small concessions the purchasing folks can show their bosses as proof of their negotiating savvy. As such, they tend to appear later in the process, after the deal is well-qualified and moving toward the end zone.
But when discounts start appearing at the very beginning of the conversation, it can signal that something important has shifted…
Sales reps’ confidence in the differential value story may be waning. Sales managers may have slacked off on value-oriented reinforcement and coaching. Customers may have learned that price concessions are easy to obtain. Or compensation pressures may be pushing reps toward the fastest lever they can pull.
Whatever the cause, when discounting moves from the back pocket to the opening play, it can mark the beginning of a damaging spiral where “discounting” takes the place of “selling” and expectations keep drifting lower.
WARNING — Discipline Is Getting Wobbly
In a business of any scale and scope, some variation in realized prices is perfectly normal. Slightly different deal compositions. Different timings. Different purchasing people. Different sales reps. Different phases of the moon! Even within tightly defined pricing segments, a certain amount of price dispersion is expected.
But just like with exceptions, there’s an acceptable range of variability. Some deals land a little higher. Some land a little lower. And as long as the realized prices are within that “normal” range for the segment, things are probably ok.
On the other hand, when price dispersion within segments begins to break through those established guardrails, it can signal an erosion of pricing discipline…
Certain managers may be turning a blind eye to sloppy execution in the field. Some sales reps might be interpreting the pricing guidance incorrectly. System-level prompts and alerts might not be functioning properly. Or it could be that accountability has become so lax that no one feels responsible for maintaining discipline.
Left unchecked, widening dispersion and faltering discipline tends to compound over time, as every out-of-bounds deal creates a new reference point for the next. And before you know it, the pricing structure that once ensured consistency starts looking like nothing more than a loose suggestion.
Again, serious pricing problems rarely show up all at once. In most cases, they’ll creep up on us gradually over time. A few more exceptions and discounts over here. A little more variation and sloppiness over there. And at the time, none of these things may seem like a big deal.
But we need to be vigilant and take these types of early warning signs seriously. They give us a chance to step back, figure out what could be brewing beneath the surface, and address the root causes before too much damage is done.
Dealing with Price Exceptions
For many teams, their exception-handling processes are a significant and ongoing source of frustration and inefficiency. So how should you go about improving these critical processes?
Getting Control of Discounting
In B2B, discounting tend to be the norm rather than the exception. How do we make sure the discounts are appropriate and warranted? And how do we do it without alienating the sales team?
Driving Consistent Price Execution
Every B2B pricing team wants to ensure that their sales team is consistently applying the appropriate pricing levels and policies. How do you make it happen? What do you need to know?
