Sales Reps & Market Pricing

by Chris Arlen on April 9, 2013

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Sales Reps and Market PricingMost sales reps are kept away from the pricing cookie jar as they’re considered too self-serving to price what they sell – think of the runaway commissions.

(Sales rep voiceover: “God, grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.”)

However, there is a role for sales reps when it comes to pricing: to educate their pricing team on market rates – and to battle for prices customers are likely to buy.

The reality is that customers won’t pay twice the market rate – yet badly priced offers are often blamed on sales reps’ inability to sell, rather than the pricing team’s ignorance.

Reps are in the best position for acquiring market pricing data – but they’re usually lousy at presenting it to their teams. It’s often presented verbally; at the last minute as the sales proposal is hammered out; and it sounds like whining, something like this:

“We can’t price it at that because Competitor X is at least 20% lower, and they’re just down the street.”

Surprise! The pricing team looks at the rep and blows them off, sticking with their unrealistic price, and as a result, many a done deal is undone.

Sales Rep Research to the Rescue

Sales reps should research market pricing throughout the year – Hey, you talk with customers all day, some of that jawing has to be around what customers are paying.

Why not be disciplined about it. Either one, two or three times a year, set out to explicitly learn what customers and prospects are paying.

Start with Your Customers

Make it easy and produce an internal base line of what your firm is charging for the types of customers you sell to.

Market Pricing Research TableCapture that data in a simple table, one where you can add some minimal degree of scale. You’ll want to place pricing relative to a common denominator you can collect on everyone. That may be volume by square feet, number of employees per site, annual revenue, whatever the number is, you must be able to acquire it for all customers and prospects.

Work on Target Prospects/Friends

Take a month and intentionally meet with prospects you’re friendly with and ask about pricing. Feel your way through normal conversation and see what you can learn.

Alternatively, ask them the following questions (they’re from Van Westendorp’s Price Sensitivity Meter, which has a number of flaws and takes a lot of work to do properly – but the questions are good) :

1) At what price would you consider XXXX (fill in whatever you’re selling) to be so expensive that you would not consider buying it?

2) At what price would you consider XXXX to be priced so low that you would feel the quality couldn’t be very good?

3) At what price would you consider XXXX starting to get expensive, so that it is not out of the question, but you would have to give some thought to buying it?

4) At what price would you consider XXXX to be a bargain—a great buy for the money?

See, it’s kind of like a game where you don’t ask them what they’re paying, exactly.

Graph Market Pricing

Market Pricing Research ChartTake the pricing data you’ve gathered and plot it on a chart.

Throw it onto two axises: the horizontal for price, and the vertical for scale/volume.

You’ll then be able to identify where most of the market is priced (Market Range), and not overreact to the outliers, which are those few at very high (Premium) or very low prices.

Put Market Pricing to Work

When that next big sales opportunity comes around, pull out your market pricing research and educate your internal team.

Do it before they’ve worked up what they think their pricing should be. You want to give them context for creating the most appropriate and competitive price.

They’ll be glad you did so early and with plotted data.

You’ll be glad you did as you’ll get input into pricing, and increased chances for winning the sale.

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