There is a fascinating debate going on in one of our favorite LinkedIn Groups, Sales and Marketing Executives hosted by our good friend, Eric Blumthal. There are many great sales questions in this group and recommend you join.
A big decision every sales VP has to make is: do they allow their sales reps to know the numbers behind the sale? The difference in knowing the answer to this question is a key factor in driving top-line revenue.
We’ve pulled the best response from a private and credible group of crowd-sourced community of trusted and respected sales leaders.
Since it’s a private group, we’ve kept the responses anonymous so as not to infringe on anyone’s privacy.
The case for “No”:
I suppose you will get arguments pro and con, but we recently concluded that they should not. We used to give them all that information, and they spent a lot of time “working the deal” in spreadsheets to figure out how to price something. They were giving 3% off of this, 25% off of that, 10% off of something else … all with the understanding that customers (and many partners who resell our stuff) who got significant discounts should have contracts in place. Sometimes they did not have a contract but got discounts anyway.
- Reps spend their time selling and no longer spend hours pouring over spreadsheets to play games with discounts.
- Accounts that are not entitled to discounts are not getting one
- Anything outside of contractual agreements requires approvals
- I have a feeling the deals we write overall are more profitable because they are based on what it will take to get the deal and not on the lowest price a rep can get it down to.
- Management has rejected a number of deals that were not profitable, or were discounted too much for an account that has no contract in place.
Best response to “Yes”:
The more you can empower a sales representative in a sales cycle the more likelihood you can expedite and close a sales cycle. It must be tied to the compensation as a percentage of gross margin. You will be surprised to know that you will have sales with increased margins when doing this. I would recommend you have a ‘walk away margin’ and a ‘marketshare growth margin’ and you train your sales force to understand the importance of both and their effects on compensation. The more you can train a sales person to approach their territory as their business the greater the results.
Best response to “Both”:
For small company it make sense to know the margin but for big companies this is the sales manager or the country manager who should know the margin and manage the sales then and give guidelines. In general sales management are compensated on PNL.
It all depends upon the nature of business and the product at hand. Here I am referring to absolute front line salespeople.
Salespeople’s energies should be focused on
- Product-wise targets (whose profitability is managed by the management)
- Numeric and weighted distribution
- In-market execution
- Payables/ market out-standings
- Gathering market intelligence.
This is more than enough to consume all of their work hours available. In conclusion, issues such as profits margin, discount, specially agreements, exclusivity deals should have prior approvals and should be left with the management in order to have some financial sanity
Salesloft’s Answer in a Metaphor to the Sales Question:
In golf, when you’re attention and focus turns to the score rather than the shot, one’s performance suffers. Sales reps should only be focused on the one thing they know how to do extremely well: sell. Keep it simple for them, us, and everyone involved.
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