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Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale
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Increasing Sales Force Performance through Science-Based Pricing Guidance at the Point-of-Sale

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  • 1. Increasing Sales Force Performance through Science 1 Increasing Sales Force Performance through Science-based Pricing Guidance at the Point-of-Sale Unlock Your Data • Unleash Your Sales By Matt McClung, Sr. Manager, PROS Professional Services
  • 2. Increasing Sales Force Performance through Science 2 Companies typically compensate sales representatives in terms of revenue and volume. Sales reps then reach out to customers with a quota based on revenue targets without regard to profit margin. In a number of industries, sales reps enjoy a large degree of autonomy and typically have sole discretion in making pricing decisions, particularly on smaller deals that may make up the vast majority of deals made by a company. Reps base their quotes on their own limited knowledge of the customer and of the market forces in play at the time of quote. Such forces include end-of-quarter deadlines, customer requests for lower pricing, and also the perceived level of competition at the customer site and demand trends for the products the sales person is selling. Companies rarely provide guidance to their sales force except for MSRP or list pricing. Sales representatives can increase their own personal performance and that of the company if they are given fact-based, scientific pricing guidance at the point-of- sale. Pricing guidance provides exactly such information that seamlessly integrates into existing systems to maximize profitability and adoption while mitigating risks. Pricing guidance is used to describe several price points, typically based on a scientific segmentation study that take into account the individual buying habits of each customer. These price points are calculated using historical data and measures such as a last price, average price, max price, market price, willingness to pay, etc. These price points are then used to calculate price benchmarks such as floor, target and stretch that give the sales person insight into his ability to extract margin from each customer in each negotiation. It is important to note that such an approach allows a sales person to leverage his own experience in addition to the scientific guidance; he is not forced to charge a specific price, but, instead, is presented with with a set of pricing options. Pricing guidance can be applied to actual dollar price, margin, rebate, discount dollars and discount percentage depending on the characteristics of each individual business. The company’s pricing team will work to identify the correct mix of guidance for each study and use their business knowledge to set thresholds and implement business rules that provide the best performance for each individual business situation. Pricing guidance works for resale (spot) pricing, program pricing and contract pricing to allow companies to maximize profitability across their sales efforts. Introduction Pricing Guidance
  • 3. Increasing Sales Force Performance through Science 3 One of the biggest hurdles in implementing any change to a company’s pricing process is that of change management and sales adoption. The best pricing will have no effect if the sales force does not embrace it. Pricing guidance integrates seamlessly into existing systems to facilitate adoption and minimize risk by not requiring sales reps to change their daily work processes. This is one of several critical steps toward successful adoption. Another key component in implementing a successful change strategy is creating a communication plan. Companies must announce the new pricing to the field, which may include a series of webcasts that detail the science behind the numbers in order to instill confidence. In addition to describing the science- based pricing to the sales force, many companies implement changes in sales rep compensation plans that take into account not only revenues, volumes, or profit margins but whether or not the guidance was used. The communication plan may also entail road shows where a company’s pricing project team will travel to the field sales offices where pricing guidance is implemented and speak directly with the sales reps that will use the new pricing. This level of commitment to the pricing initiative from the project and executive teams helps to increase sales force adoption. As part of the road show, it is recommended that each local and regional sales office has a project champion to help promote the initiative. It is critical that any new pricing initiative include change management. The change management plan should start early, and the message must be reiterated often to ensure success. Once the change is communicated, it is important for the company to measure sales adoption and evaluate success of the project. Many companies use an analytics tool that allows the pricing team and executive management to easily identify sales adoption issues, rank performance, and analyze results of the pricing guidance study. This allows the team to pinpoint areas of improvement and take corrective action, further strengthening adoption and facilitating performance improvements. Change Management
  • 4. Increasing Sales Force Performance through Science 4 Figure 1. Measuring adoption and pinpointing areas for improvement This partial screen capture (from PROS Scientific Analytics) shows the sales manager’s revenue mix as a percentage priced below floor (blue), floor to target (yellow), target to stretch (green), and above stretch (orange). This instantly lets executive management know the health of the business and the adoption of the new prices. Further, the report allows the pricing team to take action and decide how to better price/adjust thresholds if needed. Similar analysis can be done by customer/customer segment to identify customer adoption of the new pricing.
  • 5. Increasing Sales Force Performance through Science 5 Once pricing guidance is implemented, the results are immediately quantifiable. Normalizing data to focus only on pricing guidance, customers achieve tremendous improvements in profitability. A PROS distribution customer, with traditionally razor-thin margins, realized margin improvement in excess of 200 basis points within the first month of introduction. This constitutes a tremendous result that provides a high and fast ROI for companies implementing a pricing guidance solution. To test the results of a pricing guidance study, customers typically set up a control and test group within their sales force. Once the project kicks-off and the sales reps in the control group notice the results (commission) of those using pricing guidance, the control group often requests to move to the new pricing guidance. This helps sales adoption by creating a “pull” rather than a “push” environment. Companies that provide fact- and science-based guidance to their sales force at the point-of-sale while still allowing some autonomy in the final price setting, stand to see quick, measurable returns by enabling their sales force to make better pricing decisions. Implementing pricing guidance is a way for companies to gain a competitive edge and ensure they charge the right price to the right customer, for the right product, at the right time, which maximizes sales force performance and profitability. PROS’ world-class science and products enable our customers to implement and measure pricing guidance studies. Results Conclusion
  • 6. Increasing Sales Force Performance through Science 6 Matt McClung is a Senior Manager of Professional Services at PROS, where he is responsible for customer relationships and the integration of customer pricing models with PROS solutions. He has more than six years of experience working with providers in the area of medical manufacturers, distributors and services. He also has extensive experience in distribution. Matt has an MBA from Rice University in Houston, Texas. Matt McClung Matt McClung is a Senior Manager of Professional Services at PROS, where he is responsible for customer relationships and the integration of customer pricing models with PROS solutions. He has more than six years of experience working with providers in the area of medical manufacturers, distributors and services. He also has extensive experience in distribution. Matt has an MBA from Rice University in Houston, Texas. Matt McClung
  • 7. Increasing Sales Force Performance through Science 7 PROS Holdings, Inc. (NYSE: PRO) is a big data software company that helps customers outperform in their markets by using big data to sell more effectively. We apply 27 years of data science experience to unlock buying patterns and preferences within transaction data to reveal which opportunities are most likely to close, which offers are most likely to sell and which prices are most likely to win. PROS offers big data solutions to optimize sales, pricing, quoting, rebates and revenue management across more than 30 industries. PROS has implemented more than 600 solutions in more than 55 countries. The PROS team comprises more than 700 professionals around the world. To learn more, visit www.pros.com. About PROS PROS.com Copyright © 2013, PROS Inc. All rights reserved. This document is provided for information purposes only and the contents hereof are subject to change without notice. This document is not warranted to be error-free, nor subject to any other warranties or conditions, whether expressed orally or implied in law, including implied warranties and conditions of merchantability or fitness for a particular purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document. This document may not be reproduced or transmitted in any form or by any means, electronic or mechanical, for any purpose, without our prior written permission.

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