Managing Pricing as a Sales Manager

As a sales manager, you have many responsibilities and only so much time in the day. It is impossible to be hands-on with every sales rep and also keep an eye on their performance as well as manage their quotas. Therefore, it is paramount that you delegate tasks with clarity and ease. 

One of the most important decisions you will make as a manager is how to price deals for your team. Pricing is one of the most complicated and challenging tasks for any salesperson, but as the manager you need to simplify the process. You want to explain pricing points clearly so that everyone understands how they contribute to hitting quota or even surpassing it by a certain percentage.

The first part of your sales team’s responsibility is to sell a product at a price that’s fair for both the buyer and seller. If you’re selling a product that’s not competitively priced, then there’s no reason for anyone to buy it. The second part of your team’s responsibility is to help educate buyers on what makes your product better than others in its category.

Pricing is an important aspect of selling because it’s how you make money as a business — but it’s also one of the most difficult aspects for your salespeople to manage because each deal has unique variables that affect pricing decisions.

If you’re a new sales manager looking to gain insight from experienced leaders or if you are an experienced sales manager looking for new ideas, this read will help prep you for what’s ahead. We also go over some tips for managing pricing across your team in order to hit quota once again at the end of every quarter!

Pricing Methods

There are a variety of different ways to price deals, but they can all be broken down into two categories: Cost Plus Pricing and Value Pricing.

Cost Plus Pricing: This method takes the cost of goods sold (COGS) and adds an additional markup percentage to cover other expenses such as shipping, taxes, and profit margin. The customer usually pays these fees when making their purchase. For example, if you sell an item for $100 with a 20% markup, the customer pays $120 for that item.

Value Pricing: This method takes into account all costs associated with selling an item, but also considers its value relative to other products on the market or in your company’s catalog. The customer only pays for what they receive — no hidden fees or surprises at checkout! For example, if you sell an item for $100 with 100% profit margin, then there is no markup added to this cost because it has already been covered by the price you set (it assumes your COGS are $50).

Pricing in practice

Understand your market. Before you get started, you need to know your market, which means knowing the external variables that impact your business, from geography to regulation, to culture and even just what’s common practice. For example, if you operate in a regulated  business, you might have pricing ceilings that you can not go over. If you operate in a not-for-profit industry, this will have an immediate impact on your pricing policy.

Understand your competition. When you are trying to figure out how to price your deals, it is important to get to know your competitors. You can find out how much a competitor charges for their deals by looking at their price lists – whether it is on their website or in their catalog. Doing this will give you an idea of how much a customer is willing to pay for your services. This will allow you to come up with a pricing strategy that will give you the most profit.

Understand your customers. In order to maximize your profits, you should learn about your customers and their needs. You need to know your customers’ buying habits and their purchasing patterns. Run surveys, trade discounts for customer reviews, read industry reports, etc. You need to find out what your customers’ pain points are and why they are buying your product or service

Understand the value of your team. One of the most important decisions you will make as a manager is how to price your team’s time, especially in service, people-heavy industries. Pricing is one of the most complicated and challenging tasks for any sales managers, but it is also one of the most important. It is important to understand the value of your team’s work to establish your pricing. How you price your deals will depend on the value that you assign to your time, the effort involved, the ability to close the deal, the location and the market.

Define your pricing guidelines. With all the above information at hand, you should define your price range, your average price point, and provide any other guidelines that your team needs to know in order to get out there and sell. Create a price sheet that clearly explains your pricing guidelines to your team, and if possible provide them with some leeway that allows them to close a deal in case they need to.

Apply your pricing policy. As soon as your guidelines are created and communicated, you have trained your team and ran various mock sales calls to test them in practice, it’s time to publish them internally, and release your sales team into the wild!

CONCLUSION

Pricing deals is one of the most difficult tasks for any sales manager to do correctly, and will certainly be one of your most important decisions. We are here to help you understand the basics and how you should price your deals. Please reach out to us anytime if you have any further questions or concerns by emailing us at sm101@remarkable-story.com. Thank you for reading, we are excited to hear from you!