• Save
Sales & Pricing Strategies
Upcoming SlideShare
Loading in...5
×
 

Sales & Pricing Strategies

on

  • 639 views

This presentation discusses sales and pricing strategies and how your channel of distribution can impact your margins.

This presentation discusses sales and pricing strategies and how your channel of distribution can impact your margins.

Statistics

Views

Total Views
639
Views on SlideShare
636
Embed Views
3

Actions

Likes
5
Downloads
0
Comments
0

2 Embeds 3

http://www.linkedin.com 2
https://www.linkedin.com 1

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

Sales & Pricing Strategies Sales & Pricing Strategies Presentation Transcript

  • Sales & Pricing Strategies Lawrence KirschMarketing & Management Consulting 760-845-1633 www.LawrenceKirsch.com Larry@LawrenceKirsch.com
  • Agenda• Marketing Versus Selling• Product / Service Requirements• The Sales Process• The Distribution Channels• Your Sales Approach• Pricing Strategy
  • Marketing Versus SellingMarketing• Everything you do to Reach & Persuade prospectsSelling• Everything you do to close the sale and get a signed agreement or contract
  • Marketing Comes BeforeSelling • Knowing Your Market – Size, Segments & Trends • Understanding Their Wants & Needs • Identifying The Most Appropriate Message
  • Selling Is A Part ofMarketing Direct Mail Sales Website Email Marketing Trade Shows Print Ads
  • Selling Is A Part ofMarketingSelling Focuses On… • Engaging the prospect • Moving the prospect through the sales process • Closing the sale • Managing the account
  • Sales Strategy FollowsMarketing Strategy Marketing determines the audience (direction)• Industry• Markets (sub markets)• Audience (size, location, etc.)• Message
  • Your Product / ServiceImpacts Your Sales ProcessIf it is Complicated, Expensive or New… • Takes more time to explain • Takes more time to understand • Make take longer to complete the sales cycle Note: The Distribution Channel has needs too. (More on that later)
  • Your Product / ServiceImpacts Your Sales ProcessThis will influence your Sales approach… • Can marketing close the deal alone? • What sort of “selling” is required? • How much “follow-up” is needed?
  • Your Product / Service Impacts Your Sales ProcessLoyaltyProgramfor 4 and5-StarHotels
  • Your Product / Service Impacts Your Sales ProcessLoyaltyProgramfor 4 and5-StarHotels
  • Your Product / ServiceImpacts Your Sales ProcessCost of Sales (estimates): • Telemarketing = $70 / per sale • Web-based sales = $30 / per saleHMC wanted their Website to make thesale
  • Your Product / ServiceImpacts Your Sales ProcessWhat HMC found was: • It was a fairly complicated message • There were a lot of questions that came up • And trained telemarketers would close far more often then the website
  • Your Product / ServiceImpacts Your Sales ProcessSo they went back to TelemarketingAnd used the Website to improve theirrenewal rates • Current renewal rates = 52% • Using Website / Email contact - better communication = increased renewal rates • Increase goes right to the bottom line
  • Know The Sales ProcessWho are the prospective players? • Influencers • Decision Makers • The Buyers • They have the authority to purchase
  • Know The Sales ProcessHow do they make decisions? • Presentations to… • One Individual? • Several Individuals at different times? • Committees? / Others?
  • Know The Sales ProcessWhat do they expect of you? • Samples? • Proposal? • Presentation?How much “handholding” will theyneed?
  • Know The Sales Process
  • Know The Sales ProcessWhat is their Timing? • Buying now? • If later… When?Is there a buying cycle? • Certain months / quarters? (Based on their selling cycle)
  • Know The Sales ProcessDo they have a budget? • Yes • No • Kind of… • We’re not telling…
  • Know The Sales ProcessDo they expect special terms? • 2/10, Net 30 (take the 2% - pay in 30?) • Net 45 / Net 60 / Net 90? • Free Shipping • Free Warehousing • Free Product
  • Know Your DistributionChannels• Business to Business• Business to Consumer• Business to GovernmentNote: Each Channel Has NeedsAlso…The Channel Impacts Pricing
  • Industrial Marketing Channels 0-level 1-level 2-level 3-levelManufacturer Manufacturer Manufacturer Manufacturer Manufacturer’s Manufacturer’s Representative Sales Branch Industrial Distributor Industrial Industrial Industrial Industrial Customer Customer Customer Customer 23
  • Consumer Marketing Channels 0-level 1-level 2-level 3-levelManufacturer Manufacturer Manufacturer Manufacturer Wholesaler Wholesaler Jobber Retailer Retailer Retailer Consumer Consumer Consumer Consumer 24
  • Your Sales ApproachWho is making the Sales Calls? • You • Inside Sales Staff (Part or Full Time) • Company Field Sales Staff • Manufacturer’s Representative (Independent Sales Agent)
  • Your Sales ApproachIf You are making the calls… • How much time per day? – Cold Calling / Responding to RFQs – Following Up (letters / emails / calls) – Generating New Leads – Paperwork?
  • Your Sales ApproachIf Someone Else is making the calls… • How effective are they? – Cold Calling / Responding to RFQs – Following Up (letters / emails / calls) – Generating New Leads – Paperwork?
  • Your Sales ApproachStructure Your Sales Team according to the Nature of… • Your Products / Services • The Channel of Distribution • The Selling Cycle
  • Evaluating Sales ApproachAlternativesEast Coast Manufacturer of Test Equipment • Looking to expand in the west coast • Whether to hire 10 sales employees… • Or utilize a Rep Agency (with 30 sales people). 29
  • Evaluating Sales ApproachAlternativesEast Coast Manufacturer of Test Equipment • Economic Criteria • Control Criteria • Adaptive Criteria 30
  • Evaluating Sales ApproachAlternativesEast Coast Manufacturer of Test Equipment • Economic Criteria Initial costs – future costs Efficiency in prospecting / selling 31
  • Evaluating Sales Approach Alternatives Economic Criteria Selling Costs (&)Manufacturer’s RepCompany’s Sales Force Level of Sales ($) SB 32
  • Evaluating Sales ApproachAlternativesEast Coast Manufacturer of Test Equipment • Control Criteria Degree of focus on the manufacturer’s products 33
  • Evaluating Sales ApproachAlternatives Manufacturers’ Representative 34
  • Evaluating Sales ApproachAlternatives East Coast Manufacturer of Test Equipment • Adaptive Criteria The need to respond quickly to changes in the market and competitive pressures 35
  • Evaluating Sales ApproachAlternatives Whatever The Decision, You Must… • Train the Sales Team • Motivate the team and channel • Continually evaluate the sales approach 36
  • Pros & Cons Of Sales Teams Sales Employees Pros ConsProduct Knowledge Initial Salary CostsProduct Focus (Yours) Expenses / Auto / Etc.Easy Access to Customer Lack of Market AccessFeedback (Especially New Markets)Complete Control Over May need to Train StaffSales Process Regarding Selling 37
  • Pros & Cons Of Sales Teams Manufacturer’s Representatives Pros ConsIndustry Knowledge Representing Other ProductsAccess to Key Buyers Less Control of Sales(Established Relationships) ProcessLow Start-Up Costs Difficult to Keep TrackPay When a Sale Is Made Less Access to Customer FeedbackAccess to New Markets 38
  • Motivating The ChannelPush StrategiesA strategy that entices your Channel to sellyour products versus other manufacturers.Push strategy examples are:• Travel incentive programs (all-expense-paid trip)• Merchandise programs (televisions, sporting goods, clothing and gourmet foods)• Training programs (increase salespeoples comfort level with your products). 39
  • Push Strategies• Monetary SPIFFS (special promotional incentive factory funds) Example: Next 30 days, you will pay $30 per unit SPIFF bonus for each case sold.• Special discounts or allowances. Example: Next 60 days, new customers receive additional 10% discount.• Local COOP advertising efforts (direct mail, exhibitions, space advertising) – provide $ to support advertising efforts. 40
  • Push Strategy 41
  • Motivating The End UserPull Strategies (Marketing)A strategy that motivates the end user toapproach your channel of distribution and "callout" for your product. Pull strategy examplesare:• Space advertising in leading publications• Media releases announcing new value offers or features• Rebate programs offering a limited-time, factory-issued cash rebate to end users 42
  • Pull Strategies• Direct mail campaigns targeted at qualified individuals who request further contact.• End user Seminars conducted by your staff• Telemarketing efforts that can capture qualified sales leads• Internet exposure via a Web page• Radio and television advertising 43
  • Pull Strategy 44
  • Training The ChannelMicrosoft: Reseller Training Program - • Requires third-party service engineers to complete a set of courses and take certification exams. • Those who pass are formally recognized as Microsoft Certified Professionals – and can use this designation to promote business. 45
  • Your Pricing Strategy
  • Economic View of Pricing 47
  • Marketing View of Pricing Quality Low HighP Low Economy Penetrationrice Skimming Premium High Pricing Strategies Matrix 48
  • Marketing View Details A high price set because of product or servicePremium uniqueness. Requires substantial competitivePricing advantage to be sustained.Penetration An artificially low price set to gain market share.Pricing Once share is achieved, the price is increased. A “no frills” low price is set. The cost of marketingEconomy and manufacturing are kept at a minimum.Pricing Typically, a follower strategy. A non-sustainable high price is set which limitsPrice market but recoups trail blazing investmentSkimming faster. 49
  • Pricing Tactics Used when the marketer wants the consumer toPsychological Pricing respond emotionally. Example $29.95 cents. Used to get the customer to buy more than oneProduct Line Pricing product—a wash, a wax, etc.Optional Product Pricing Extras are discussed once the initial purchase is set. A low price is charged for the product. But premiumCaptive Product Pricing price is charged once the consumer is captured. Example printers and printer cartridges / razors.Promotional Pricing Buy One, Get One FreeGeographical Pricing Pricing varied to markets and regions A bundle helps the customer solve a combined needSolution Pricing – a mop head and the handle. The McDonald’s Value Meal. Allows different offers toValue Pricing be made to different audiences
  • How Channels Affect PricingConsumer Market:You sell directly to the End User via your website.Your Cost is $5. Your Retail Price is competitive at $20 (giving you a profitmargin of 75%). Company Manufacturer End User Website Your Cost: $5 Sell Price: $20 Purchase Price: $20 You’re making $15 on each unit: 75% profit margin 51
  • How Channels Affect PricingLater, you decide to sell through small retailers – requiring theservices of a Distributor. You want to maintain your 75% profitmargin. Wholesaler / Manufacturer Distributor Retailer End User (takes title) Margin: 75% Margin: 35% Margin: 50% Purchase Price: Your Cost: $5 Purchase: $20 Purchase: $30.77 $61.54 Sell Price: $20 Sell Price: $30.77 Sell Price: $61.54At a retail price of $61.54, you have effectively priced yourselfway out of the market. The channel would never support this. 52
  • How Channels Affect PricingIn order to meet the competitive $20 retail price, and toaccommodate the required channel margins, you will need toreduce your wholesale price. Wholesaler / Manufacturer Distributor Retailer End User (takes title) Margin: 23% Margin: 35% Margin: 50% Purchase Price: Your Cost: $5 Purchase: $6.49 Purchase: $9.99 $19.98 Sell Price: $6.49 Sell Price: $9.99 Sell Price: $19.98 Instead of a 75% margin, you now can expect a 23% margin. 53
  • How Channels Affect PricingInclude an independent sales rep agency, and you can expectyour sales costs to increase. The Rep Agency will expect a 10%commission on any sales to Wholesalers. Manufacturer Wholesaler / Sales Rep Distributor Retailer End User (takes title) Commission: 10% Margin: 13% Margin: 35% Margin: 50% Purchase Price: Purchase: $6.49 Purchase: $9.99 $19.98 Your Cost: $5.65 Sell Price: $6.49 Sell Price: $9.99 Sell Price: $19.98 Instead of a 23% margin, you now can expect a 13% margin. 54
  • The Apple Retail Store Effectively supports a “high-end” pricing strategy • Control the message • Control the environment • Provide opportunities to learn about and sample products • Have knowledgeable people available to answer questions 55
  • Factors To Consider Inelastic Demand Elastic Demand $15 $15Price $10 $10 133 150 50 150 Quantity demanded per period 56
  • Conditions Inelastic Demand • Few or no competitors Sales • Buyers don’t notice $15 $1,995 higher pricePrice • Buyers slow to change habits $10 $1,500 • Buyers think higher prices are justified by quality, etc. 133 150 Quantity demanded per period 57
  • Factors To Consider Elastic DemandIf Demand is Elastic, Sales• Sellers will consider $750 $15 lowing their price. Price• A lower price will $1,500 produce more total $10 revenue. 50 150 Quantity demanded per period 58
  • Anchoring EffectWhen making purchasingdecisions, we tend to rely tooheavily on the first pricinginformation offered (the "anchor").Anchoring occurs when we use aninitial price to make subsequentjudgments. 59
  • Anchoring EffectExample: The iPadDuring Steve Jobs’ presentationhe refers to the pundits suggestinga price under $1,000 (or $999).But reveals a starting price of$499. 60
  • 61
  • Pricing – The Decoy EffectOr Asymmetric Dominance EffectThe phenomenon wherebyconsumers will tend to have a specificchange in preference between twooptions when presented with a thirdoption. 62
  • Pricing – The Decoy EffectExample: A Subscription Research suggests consumers offered a choice between (for example) a $59 Internet-only subscription and a $125 print subscription will generally opt for the Internet-only option. 63
  • Pricing – The Decoy EffectExample: A SubscriptionHowever, if there’s a choice between: • $59 Internet-only • $125 print-only • $129 print and Internet combinedMore people will choose the priciest option.The $125 middle ground exists to make the$129 deal look cheaper by comparison, notas a serious choice. 64
  • Sales & Pricing Strategies Lawrence KirschMarketing & Management Consulting 760-845-1633 www.LawrenceKirsch.com Larry@LawrenceKirsch.com