Has Your Company Recently Rationalized Your Prices and Fees?

I read an article in Fortune (10/29/2008) that reminded me again how important it is that companies rationalize their prices and fees during this tough economic time.

Sales people and their managers have enough of a challenge without having to overcome customer objections and competitive pricing pressures because their prices are artificially high or their fees have been calculated on top of the healthy—but perhaps no longer appropriate—margins that we all enjoyed a few years back.

At General Mills, the Holistic Margin Management system has helped them sustain higher margins than their peers.

From the article:

[General Mills CEO Ken] Powell’s team first applied the system to struggling Hamburger Helper. At the time the company sold 50 versions of the product, with 25 pastas ranging from wagon wheels to spirals. Executives researched the costs of producing the different options as well as how much consumers liked them, then eliminated half of them. They excised unimportant spice and cheese pouches. They shrank the size of the box while keeping the serving size the same. The upshot: Hamburger Helper now costs 10% less to make.

I’m using this Hamburger Helper example to make this point:  If you find that your salespeople are losing on price these days, one of the first questions you should ask yourself is, “Can we justify our price in today’s market?”  If the answer is yes, your salespeople need some help, and fast.  If the answer is no, maybe your competition has already figured out that if they win more business at lower margins, they come out ahead.

Photo: Amazon

Selling on Minnesota Nice, Not Price

Here's a company that's taking "nice" to the bank.

I’m on a Northwest Airlines flight, headed home from an invigorating three days at a client’s annual sales retreat. It was held at Madden’s Resort on Gull Lake, 2½ hours or so from the Twin Cities.  Nice place.

No matter how long you’ve been doing business, if you keep your eyes, ears, and, most importantly, your mind open, you’ll invariably learn something. (I think it was Woody Allen who said, “Keep an open mind-but not so open that your brain falls out.”)

So, here is a company that is unlike any other I’ve worked with in a number of ways. In an industry rife with lawsuits, they have none. They truly live by a code of integrity, focus on the customer and respect for their own people; it’s not just verbiage on their “About Us” website page or framed for all to see in the lobby at headquarters. It’s not an act.  They’re real. And to prove it, they were celebrating moving from fifth place in size in their industry to fourth.  That’s considerable progress from 16th place, which is where they were just a few years ago.  And that’s an industry where price is often the number one or number two buying criterion.

Sure, they have their challenges, just like any other company. But there is something very special going on there. Hopefully down the road, with the client’s permission, we can document their progress toward sales effectiveness in a case study.

We were referred to this client by another Minnesotan in the sales performance improvement space. That person has the business savvy, integrity and self-confidence to admit to they couldn’t deliver what the client needed. Now, there is a trusted advisor.

I don’t ever remember being so looked after by a client. One team member after another made sure I was as comfortable as I could be. They were interested in not only what I had to say, but in me. This wasn’t rehearsed or part of a plan. If they treated me this way, I can only imagine how they treat their customers. 

This, I learned, is Minnesota Nice.  And they’re taking it to the bank.

Competing on Price

There are companies that must compete on price in many, most, or even all deals.  That’s a function of what they are selling, into what markets, and against which competitors.  With that being said, too many companies often wind up competing on price because they simply aren’t very good at selling.

The “sales ineffectiveness” affliction that so many companies suffer from is apparent during my initial conversation with sales leaders and their marketing counterparts.  It takes about 30 seconds before the word “price” is uttered—and not by me.  As I dig deeper they tell me that their biggest challenge is “being forced to compete on price.”

“Forced by whom?” I ask.  Most often the answer is “our competition.”  Sometimes it’s “the customer.”  When you think about it, both answers are pretty much the same.

The discussion goes on… “We do a great job building relationships, understanding the customer and selling our unique value,” they continue.  “Then, at the last minute the competition slashes their price and we’re forced to beat it or lose the deal.” They may have done a “great job” with a number of things, but competitive selling isn’t one of them.

Here are some sales leader-level questions for you to answer: