I have friends whose children attend a private school with a strict uniforms-only dress code. I happened to be at their house one night when their boys were getting their “dress” uniforms ready for a special event at school the next day.
“Do you have your tie?” the mom asked the youngest.
“No, I don’t need it,” he replied.
But your tie is part of your required uniform,” she insisted.
“Eh,” he shrugged. “I’ve already forgotten my tie like three times this year, and I never got in trouble.”
His mom did make him find his tie and wear it, but this young pup’s attitude is something we often see in sales teams.
You see, sales teams almost never get “in trouble” for missing target prices. Even if their compensation is based on part on hitting their pricing targets, they probably aren’t going to draw their manager’s ire for giving a customer a larger-than-acceptable discount.
On the other hand, salespeople often get sharp reprimands for losing deals. As a result, they care a whole lot about not getting a sale. But missing target pricing gets the same shrug that the young boy gave his uniform tie.
The natural result of this situation is a downward pressure on prices.
So what can you do about it?
Of course, part of the solution is ensuring the comp plan incentivizes better prices. But you also need to make sure that salespeople’s worries about repercussions don’t override the goal of the comp plan.
That likely means re-educating some of the management team, as well as the sales team. Pricing may not be top of mind for managers and executives — especially for those who came up through the sales ranks — and you need to make sure they are not inadvertently sending messages that pricing isn’t all that important.
In addition, we’ve seen several teams get good success through something as simple as providing a compensation calculator with their quoting tool. This shows salespeople exactly how their compensation will change as the prices they are quoting change. This basic tool — combined with management support for good pricing — can do wonders to improve margins.
For more tips on using sales compensation as a lever to shift your pricing in the right direction, check out this trio of resources:
- Revamping Sales Compensation to Improve Pricing Performance lays out a step-by-step plan for updating your compensation strategy with a minimum of conflict and disruption.
- Tackling Sales Comp to Drive Pricing Excellence features an interview with Bob Vezeau, the vice president of strategic pricing at WestRock, who shares lessons he learned while redesigning his company’s compensation plan.
- How to Avoid Sales Compensation Gotchas examines some of the most common compensation schemes, exploring their potential pitfalls and potential ways to overcome them.