Most companies are being forced to change the way they work due to the COVID-19 pandemic. What remains unchanged is
pricing excellence is still one of the most powerful profit levers a company can employ, since every additional
company captures through price goes straight to the bottom line. Pricing excellence includes best practices in
administering, and executing on price.
Even with the proliferation of data and analytic tools, very few companies arm their sales professionals with an essential full view of the customer relationship, optimized pricing guidance, and incentives aligned to take full advantage of this profit lever.
Equip sales with a 360-degree view of the customer relationship
Sales has the greatest opportunity to affect price and profitability. Yet, more often than not, companies fail to
their sales professionals to face the challenges in the field. Customers don’t want to pay higher prices, but they
seek value. When customers ubiquitously demand a lower price, the sales rep often doesn’t have the information
shift the conversation from price to value.
However, with Salesforce Customer 360, sales professionals can view the entire customer relationship, which can include key components such as value-added services, adherence to volume commitments, and invoice payment history. This is the first step in preventing sales from succumbing to the lower price demand.
Utilize price recommendations based on data science
In addition to a 360-degree view of the customer relationship, price guidance during the quote process is critical
helping sales win profitable deals. A company’s Configure, Price, and Quote (CPQ) tool should leverage a data
science-based pricing model that can generate an optimized Price Envelope (start, target, and floor price) for each
quote line item and robust deal-scoring at the quote header level.
These pricing guardrails should be determined by analyzing historical quote data, then using that data to build and continuously improve the price segmentation model. The model should identify the deal attributes that most determine price and make adjustments to the recommended prices, based on the most recent quote data.
The most reliable data to use in basing the pricing model is win data. While it seems intuitive that both win and loss data should be analyzed, the fact is that loss data at best contains a lot of noise. In other words, it is very difficult to isolate price as the determining factor of why the deal was lost. At worst, you get inaccurate pricing levels, given the tendency for sales reps to put an inordinate blame on price as the reason for why the deal was lost. Win data, on the other hand, is indisputable evidence of a customer’s willingness to pay.
This type of model represents a value-based pricing strategy that determines prices based on historical won deals. (See Figure 1.) When implemented accurately, it can drive customer loyalty while also maximizing profitability. Unfortunately, instead of using pricing science and AI, far too many companies still set prices by using the cost-plus method, or even worse, by simple guessing. The result is leaving money on the table.
Leverage pricing guidance using Salesforce Analytics
Customers using Salesforce CPQ can get started with price recommendations with Pricing Guidance. Pricing guidance uses Salesforce Analytics to create recommended discounts based on historical pricing trends. You can then assign pricing guidance to your products. When a sales rep adds a product with pricing guidance to their quote, they can open the guidance in the quote line editor to view target, norm, and floor discount recommendations.
Drive better pricing behavior
Once sales reps have the 360-degree customer view and pricing guardrails, companies need to motivate them to execute
price. One great motivator is to align incentive programs to reward more profitable deals and better pricing
Commission plans based solely on volume merely encourage rogue discounting behavior. Include a margin-based
reward sales on quality revenue and not just the volume of revenue they produce. This results in a win-win for both
company that wants to drive better margins and profitability, as well as for the sales rep who wants the opportunity
earn higher commissions.
Lastly, it is important to reinforce good pricing discipline by taking advantage of what drives sales rep behavior. Sales professionals are competitive by nature, so benchmarking sales against themselves will inevitably drive improvement. The CPQ tool that can also display “Average Selling Price” shows what price their peers have been able to close for similar deals. This not only taps into their natural competitiveness, but also provides them with confidence to hold to the target price. Additionally, sales leaders should consider creating a sales dashboard that shows the best deals or deals of the month to highlight and recognize strong pricing discipline.
Execute: Results are within reach
We are in unprecedented times that require companies to reevaluate how they go to market and sell to customers. What
hasn’t changed is that pricing remains the most powerful lever to impact bottom-line results.
To realize this business value, companies have to equip their sales reps with critical information to combat customers continually asking for a lower price. This includes enabling a true 360-degree view of the customer relationship to shift conversations from price to value, using data science-based pricing guidance during the CPQ process, and aligning incentive compensation plans to drive profitable pricing behaviors.
Leadership that enables their reps with these tools and reinforces these pricing behaviors with training and dashboards that speak to the sales professional’s natural competitiveness can finally take advantage of pricing as perhaps the most powerful profitability tool a company can wield. This is true all the time, but just might make all the difference for companies to survive—and even thrive—in these challenging times.
Resources to launch your journey to better pricing
Einstein Pricing Guidance Capabilities - Learn how pricing guidance uses Salesforce Analytics to create recommended discounts based on historical pricing trends. You can then assign pricing guidance to your products. When a sales rep adds a product with pricing guidance to their quote, they can open the guidance in the quote line editor to view target, norm, and floor discount recommendations.
Einstein Pricing Guidance Demo Video - View historical deal data that helps your pricing team set rules and price guidance for sales. Then, sales teams can price deals more effectively and close deals sooner with greater confidence.
Salesforce CPQ & Einstein Analytics: How to Drive Sales Growth Video - This video shows the power of Salesforce CPQ and Einstein Analytics. Salesforce CPQ provides the data structure that Einstein Analytics can then use to provide valuable insights into the quoting and even pricing processes. We can then use CPQ to take action on those findings. Lastly, we can extend insights to sales reps so they can price deals strategically.
Salesforce Customer 360 Video - Get an overview of Salesforce Customer 360, one integrated CRM platform for uniting marketing, sales, commerce, service, and IT departments. Learn more at https://www.salesforce.com/csp
Christopher McDonald is a Customer Success Manager at Salesforce. His 20+ year career in CRM includes 10 years of top-tier consulting and nine years of price optimization and CPQ experience where he has helped dozens of Fortune 500 companies improve their selling and pricing processes to maximize business value.