Industrial Distribution

Tom, I think you are right about the risk of givng salespeople price discretion. The only plausible counter-argument that I have heard is that, by not requiring them to get approval by higher authority, business happens faster. What do you think about that? Also, you mention some studies that you have done. Can you share more details? Thanks!

Thanks for the response, Loren. Can business happen faster? Yes. Is it always good business? No. The analogy I like to use is heads-of-state negotiating with others typically involves their getting approval domestically from their governing bodies such as congress. In negotiation, having an excuse to slow down the discounting momentum is a a plus. Caught up in the moment, many salespeople will cut price and later regret it. RE: studies 1. 75% of salespeople cave in to price objections (according to a purch agent study I conducted) 2. In my study of 1,769 salespeople, 58% of salespeople AND their managers said they would give an average discount of 7.48% to a buyer that said: Your price is too high. I could go on with studies but I think I made the point. Ironically, as a motivational psychologist, I could make a strong argument for why pricing authority is good for salesperson job enrichment, empowerment, and autonomy but the sales trainer in me won this internal battle of wits.

I have many years of first hand experience that supports your position - sales people with pricing authority do in fact leave a lot of money on the table. On the other hand, in dealing with the annual agreements, I've seen senior management cave in to prices that if left up to the field sales people, a greater margin could have been secured. Weighing both sides, my opinion is that it's a wash. There are sales people who do better than the seniors, and the other way around holds true as well. A standard response the sales person should use is "I'll get back with you" then bounce the request off your sales manager or supervisor for a second opinion.

Tom, I agree to a point. In my 22 years of sales, I have left money on the table. But, on the other hand, I have seen customers take their business elsewhere because I was waiting on management to give me an answer. In a previous job, I sold a commodity that was tied to the price of natural gas which was volitile. We had a base salary and then paid on gross margin of each contracted deal. It was in the salesman's best interest not to cut price but we had a range due to the cost of natural gas that day. The compensation plan worked with salesmen cutting pricing in fewer situations than when on a base and other incentives. Just my two cents... Wayne

You're right. Salespeople do NOT have a monoply on giving away the store. Managers pressed for quick volume do this, too. The critical issue is: Do you have a discount discipline for pricing--a rhyme or reason for your action? Random acts of discounting, by salespeople or their managers, is like death by a thousand knife cuts.