A client told me a story about one of their sales reps in Italy offering a hefty discount to close a deal with a large customer. The rep earned a big bonus payout but the company paid ‘twice’ because the discount was much larger than average, and, the Italian rep was bidding against a member of his own sales team from Switzerland for the deal.
This should never happen. Yet, as many sales managers can attest, this type of story is common in B2B.
Where Your Sales Operations Break Down
As it turns out, the majority of these stories can be traced to an outdated model of deal management. When reps have discount discretion, they can turn deals quicker, which is positive in terms of revenue velocity and overall Quote-to-Cash cycle time. But they often do so with disregard to how their offered discounts impact the total margin. On the flip side, companies in an attempt to preserve profitability initiate significant price approvals that slow sales cycles and in worst case scenarios can un-sell a deal.
Darnell Shepard of the Professional Pricing Society notes, “One of the most critical elements in an organization’s journey towards pricing excellence [and profitability for that matter] is its capacity to change.”
The most advanced performers today have invested in deal flow management software that facilitate while preserving speed, control, and profitability. Here are some of the key characteristics of an effective sales enablement and some ways you can improve your own operations.
Characteristics for Success
High performing Sales Ops are able to deliver guidance to sales reps, helping them assemble the right offering. In outmoded cases, this is delivered by business rules that live in Excel sheets and product binders. But deal flow management software picks up where Customer Relationship Management (CRM) software leaves off by making all of the complex product, pricing, and business rules centralized, automatic and available in real-time. It also allows you to ensure compliance with existing agreements, pricing terms, and financial agreements.
Reps are instantly recommended the optimal deal – the right combination of goods, services, bundles, upsell cross-sell possibilities at the optimum price. This type of guidance is an enormous help to sales reps who do not have perspective beyond their own customer set and geographic market, and, who commonly encounter sophisticated, data-wielding procurement managers. It ensures reps are making the best deals possible, while preventing hazardous discounts and cannibalism, like our aforementioned Italian rep.
Another criterion for success is aligning incentive compensation for sellers with the important parameters for each deal. Our Italian sales rep was compensated based on total revenue and sales volume. Today, deal optimization extends well beyond price and volume. Missing from the equation were margin, payment terms, product mix, and a number of elements which each contribute to the value exchange between supplier, partner, and customer. The best solutions provide a graphic display which illustrates the impact of each deal element on the rep’s incentive compensation payout and allow the rep to explore different scenarios in order to maximize the benefit to his or herself and the firm. In best cases, deal guidance is delivered through the existing Configure, Price, Quote tool and extends all the way through the Contract Lifecycle and Revenue Management process, in an end-to-end Quote-to-Cash solution.
Is it Time to Upgrade Your Deal Flow Management Software?
To find out if your business can benefit from better deal management and learn more tips to improve your overall Sales Operations, follow this link.