Thursday, January 15, 2015

Best Way to Reduce Discounting: Better Negotiating or Value Selling?

There is more pressure than ever on suppliers to lower their prices and offer steep discounts.  

Recent studies indicate that the average discount levels has risen to 20% per deal (IDC), but we find that many solution providers would be happy if that were the level of discount they were providing. Many are a whopping 50-70%!

The rise of the Buying Committee has added to price pressure. With little vested interest and with inadequate time to review competing proposals, the team tends to focus on price above much else.

And Procurement is getting way more involved in every transaction, with specific incentives to extract discounts from every vendor proposal.

You know you need to address the discounting challenge, but how?

Many companies have turned to Negotiation Training to help their sales reps and channel partners try to talk their way out of the discount. But procurement holds most of the cards in these negotiations, and as a result, this type of training is not leading to the best deal sizes and sales success outcomes.

A recent survey of 500 supplier executives indicates that top performing companies, those getting the highest price for their goods and services, uniquely invest more in Value Selling Training and Initiatives when compared to what is spent on Negotiation Training (Kotler Marketing).

Part of the reason could be that 71% of buyers say suppliers could definitely be doing more to sell the value of their products. The research indicates that without the training and tools (ROI / TCO calculators with specific benchmarks and metrics) your sales reps and channel partners are not providing the business case / financial justification needed to justify a higher price.

The advice from the research? Don’t stop investing in Negotiations Training completely, but certainly take a look at your sales and channel partner training and tools investments, concentrating much more on Value Selling Enablement versus Negotiation Training in 2015.

No comments: