SHOULD SALESPEOPLE HAVE PRICE AUTHORITY?

No.

How's that for unequivocal?

Whenever I ask this question, I generally get plenty of responses from those who wish to argue this point with me. Save your words. I don't budge on this issue, and here's why: Pricing is a strategic marketing decision that salespeople execute tactically. Sales is a function of marketing, not the other way around. Should pricing managers listen to the field and use their input for their decisions? Yes.

My reasons for this stoic attitude run deep. I've observed way too many salespeople that lacked the conviction, resolve and skills to hold the line on their prices. Every week I experience ineffective salespeople in whom companies place the responsibility for establishing prices and protecting margins. If their managers listened to these presentations in the field, they would immediately strip the reps of pricing authority.

I listened in on an inside sales rep for a florist who, when the customer said he wanted to spend $200 for "something nice" for his wife, told the customer, "You don't need to spend $200. I can get you something nice for $50." I almost had to sit on this person's boss to prevent the manager from taking over the phone call. I listened to another sales rep who, when the customer opened with "I need a discount," said, "That shouldn't be a problem." Another rep called a customer to discuss a customization fee and said, "If this is a problem for you, maybe I can try to negotiate it down."

These are not isolated examples. I hear this every week. For those who want to argue that salespeople may appear "weak" in the customer's eyes if they can't negotiate price, that's exactly why they should have to check with someone else when it comes to price.

Two-thirds of salespeople and their managers offer an average discount of 8.3 percent when a buyer asks for a cheaper price. Why 8.3 percent? Of equal interest is that most salespeople, when they discount, give a "rounded" discount: 5, 10, 15, 20, or 25 percent. Why? What is special about these "rounded" numbers?

What is your company's discount policy? Do you have guidelines for how you discount, or is the process as arbitrary as I suspect? What vetting process do you use, or what filters must this discount pass through before you pass it on? If you want to improve your bottom line, improve your decision process.

If you decide to discount, you must have guidelines. You would probably include some of the following in this decision process: profit, volume, product mix, loss leader, scarcity, reciprocity (you scratch my back...), competitive pressure, inventory clearance, special promotions, discount levels, etc.

There must be some rhyme and reason for cutting the price. Be stingy. Be selective. Be strategic. Random acts of discounting are like death by a thousand knife cuts.