Businesses and sales reps are continually under pressure to sell for less. As competitors’ lower prices, it’s natural to follow suit. In the end, profitability suffers.
For businesses that routinely quote their products and services, a well-designed sales quotation program offers several advantages to help resist and curb the pressures of margin degradation. However, it’s also important to appreciate that software isn’t the full solution. Equally important is the need for the sales team and supporting staff to commit to the goal of improving margins. Here are just a few best practices that can help your organization fight margin degradation.
- Focus on Solutions: First, the sales team needs to shift the focus from selling features and benefits to helping customers solve problems. Once the emphasis is on the customer’s problem and the solution, the price can get less sensitive and better margins can result.
- Set Targets: Next, everyone in the customer experience process (sales, customer service, finance) must appreciate the business objective of margin improvement. Software is a tool that can help set margin targets, flag jobs that fall outside the target range and initiate a workflow for approvals on low margin jobs. However, the best results come from a dedicated sales team combined with a software solution designed to support the key business goal of improved margins.
- Key Benefit: In many cases, businesses don’t know the actual margin at the quote stage and only learn about the meager profit or even a loss to the business after the order is fulfilled. A key benefit of quoting software is the ability to see expected margins and profit before the quote is even issued to the customer. Then, if negotiations on price are needed, everyone in the sales process knows what further movement is available, if any. You can also distinguish a profitable business from low margin jobs allowing you to focus resources on the business that will generate the best returns. (Read more about best practices)
- Workflow Approvals: An effective review and approval process can also help ensure minimum margins are met and quotes are 100% accurate. If a salesperson sets a discount that activates an “Approval Required” rule, workflow triggers emails to the appropriate Sales Manager, District Manager or even the CEO, depending on the authorization needed. Once approved, the workflow sends an email back to the sales rep notifying them of the approval. (Read more on workflow approvals)
- Integrated Business Rules: If you sell products sensitive to certain market fluctuations (e.g. exchange rates, price of materials like steel or aluminum, etc…) a good quoting solution offers capabilities (embedded rules/formulas) to quickly adjust day-by-day prices based on changes to these factors, thus maintaining margins. Integrating escalation factors into business rules can also be useful if you are selling products that may be delivered months down the road.
- Maximize Margin: Another effective approach is to adjust quoted margins by product, or group of products. This way, sales reps can maximize margin on some products, while offering incentives on just a few. You can also raise the margin on products that have less competition, or where you offer added value, thus increasing overall margin. It’s all simplified with an effective sales quoting solution.
- Tracking Performance: Information is gold! Tracking competitor pricing and reasons why you lost a job is highly difficult with manual procedures or using excel. However, with a centralized quote database, you can look for patterns your competition are using and adjust accordingly. You may be losing business for reasons other than price and this is easily identifiable once you have a database of quote history at your fingertips.
- Eliminates Errors: Lastly, errors and rework are costly and a huge drain on margins. An online price list helps keep pricing current and eliminates errors caused by obsolete pricing data. Consistently working with up-to-date pricing helps the sales team meet target margins and maximize profit on every quote. (Read more about migrating from Word and Excel.)
Customers will continue to demand better pricing and shorter turnaround, placing tremendous pressure on sales organizations. A well-designed sales quoting tool can help respond effectively to these demands and provide critical information to make informed decisions. Equally important to the software is working with a proven solution provider with extensive industry experience. A good software provider will take the time to understand your business objectives and align the solution to maximize the benefits to your business.
To learn more about how we can help your business, go to www.proquote-solutions.com or call 905-403-1198.