More than a decade of grousing about product management

Sales Lies Part II – Price Cuts

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Sales lie about the need for a price reduction, failing to understand market demand and the consequences of lower prices on quotas.

In product management, especially in B2B environments, you have to work closely with sales. The deals are often large, and very complex, and sales is mostly not technical enough to handle the intricacies of mapping the product to the opportunity.

So, either you have very technical and sales savvy applications engineers, or product management has to step into the role.

Note: As your business grows, and volumes increase, you can’t rely on your product management team to fulfill this role. Please monitor this, and begin hiring a suitable applications support team

When you are doing this function, you will see some of the most insane sales behaviors.

The main lie today is:

The price is too high for my territory, you need to reduce the price by xx% so that we can sell here.

– some sales drone

This ‘lie’ came to me from a territory manager in Latin America. Granted that there are several emerging economies in South America, and it does make sense to adjust pricing to accommodate.

This is all fine and dandy. As a product manager, and responsible for pricing, profitability, and margins, we have the tools to figure this out.

In the case that is stark in memory, the territory manager asked for a 10% reduction in the list price, that would help him be competitive in the region.

A thorough analysis found that this was a reasonable request, and with senior leadership approval, the change was instituted (for the record, for this case, I had to loop in the corporate pricing group, lay out the facts and gain their approval.)

One thing that wasn’t approved was a reduction in the quarterly and annual sales targets.

And that is where the sales lie begins…

In making the case of the reduced pricing due to geographical and market status, the sales manager said the price reduction would translate into more volume. So there wasn’t any flagging by sales that the quota would be at risk.

I am guessing you can figure out what happened next…

The sales team quickly closed all the open opportunities, winning over from the competition, and claimed victory.

But, they came in a lot below quota, and their comp was dinged. Dinged hard. As it should be.

What the sales manager didn’t realize is that a 10% price cut means you need to sell 17% more units to make the same revenue. There just wasn’t enough demand (aka opportunities) to generate that level of sales.

The Dude then got bombarded with requests to lobby a lowered quota, and an alteration in the comp plan (neither of which the Dude had any say in) to make his team whole.

Fuck em. They asked, the Dude analyzed, and it was approved. Now they need to belly up to the bar and deliver.

The lie – in summary

  • Sales said that pricing was difficult in their territory. It was, so we adjusted.
  • Sales assumed that meant that their quota would also be cut. It wasn’t.
  • Sales screamed bloody murder that their numbers sucked. Their numbers sucked, because what they thought was pricing pressure, really was a limit of the overall market demand in their territory.
  • Sales then lobbied for quota relief. Uh, at the beginning of each fiscal year, each sales leader negotiates and signs up for their forecast. That is your contractual obligation to the business. It sets your comp and incentives. You can’t change the goal posts (well, if you are the Trump Administration you can, but in the business world, not so much).

The Dude has no sympathy. When things go well, Sales has unlimited upside. When you fail to meet your goals, you reap the consequences. If you want sympathy, look it up in the dictionary, it is somewhere between ‘Shit’ and ‘Syphilis’.

Written by

A crusty veteran from the product management trenches. Plenty of salty language, references to cannabis, and a connoisseur of White Russian cocktails

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Written by pmdude