The words hung in the air for what seemed like a week even though it was just a couple of seconds. And I didn’t speak until it was really uncomfortable.
“I really need the lowest possible price and we need to do everything possible not to spend money on this new sales training program because budgets are really tight.”
The irony is that the sales training program the client wants us to develop and deliver is a Business Acumen program on training sales professionals how to “Sell Value” and how to not discount.
I woke up in the middle of the night thinking about the hypocrisy of the call in the moment and then the longer-term impacts of such and approach on an organization. That’s why I am calling this the danger of the full-value price mindset hypocrisy.
Here are three things to think about and learn from:
It’s a different strategy
If your company and brand is all about product innovation and superior products /services, you most likely are working for an organization that has a strategy of Product Leadership. By definition, the entire company must be aligned around a value proposition to its’ customers of delivering the best products at higher than average prices. It’s the only way to make a profit. Apple is a great example of a company that does this well. The notion of big-time discounting is something that doesn’t enter the equation and it’s a mindset in everything they do. Including the way they work with vendors and suppliers. Now, don’t get me wrong, every company needs to have operational excellence and Apple is one of the best in the world of achieving efficiencies but the difference between the way Apple does it and the way Walmart does it is completely different. Apple does it to deliver the highest quality products at the lowest possible cost to compete. Walmart does it to offer their customers the lowest possible everyday price. There is a huge difference.
The cultural implications
What sort of message does this mindset send throughout your organization? How do you ask your sales team and those around them for full price for your products when your company doesn’t believe in paying for value? I think it sets a tone and creates a culture that doesn’t believe in full value and suggests to the sales team selling your products that they don’t really have to get full pricing.
It also sends the wrong message to your vendors and suppliers. Knowing that your always try to charge full prices yet refuse to do the same in your supply chain build an animosity that creates another type of culture that doesn’t create long-term value throughout the entire organization.
It’s bad for business
Over the years, I’ve spoken to many leaders within large organizations who are forced to live through similar hypocrisy. They know that over the long term two bad things happen to the business; revenues go down and margins get squeezed. Revenues go down because ultimately the quality and value of the products decline because the company is using cheaper raw materials and their salespeople discount too much. Profits go down because revenues are down and suppliers don’t discount as much or do they provide any extra value in the supply chain process because they know the conversations will always revert to price and not value.
If you find that you work for an organization with a similar hypocrisy and you are wondering what to do about it, here are a few suggestions:
- Teach your procurement department not to be so aggressive on asking for steep discounts. Obviously, discounts for volume, length of contract, and other asks are always part of the process, but you must set limits and expectations around reasonableness.
- Always seek fair tradeoffs. If you are obliged to enter a discounting negotiation, prepare well and make sure you are asking for fair tradeoffs.
- Recognize and appreciate real value. Show the people in your company that you appreciate it and are willing to do what it takes to develop a full-value mindset and culture.