Coming up short against target?
Typically, end of year for companies is marked with people scrambling to reach targets. Sales people get desperate to cut deals and, in many industries, it is accepted that deals will become progressively better for buyers as the year end approaches. Indeed, often what a sales person might not have had authority to concede last month… becomes fair game after he, his boss or his boss’ boss decides that revenue is necessary.
However, there are some risks for sales people who go down this path:
Anyone buying software or a motor vehicle suspects that the easiest time to get the best deal is from a sales person trying to hit their quota at the end of year. The un-intended implication is that after a few years of educating the marketplace, many sales people find it hard to convince clients to buy at any other time of year because they believe they will get a better deal later.
Of course, there is also the issue of precedent. If your counter-parties are paying attention, anything you concede this year will be the expected starting point for the negotiation next year.
Finally, if you make significant concessions to close deals… those concessions often mean there is very little value left in the deal for you! Furthermore, if a client doesn’t agree to your time frames, they will typically expect the concessions anyway.
So, as sales people, what is the best way to incentivise clients without losing face, setting bad precedents or stripping the deal of value?
1. Be prepared
It is critical to understand your own limit positions and priority issues to avoid doing deals you may later regret. For example, what is more important: hitting the revenue target or doing profitable business?
It isn’t always about price… is there anything else you could do for the customer they may value even more than a discount? They may actually prefer to spend their budget!
Is there anything else we can gain in addition to their flexibility on time frames? What else is on our wish list? Eg. marketing, visibility of work plans, etc
2. Don’t assume the buyers aren’t under pressure too
Sales people aren’t the only ones with targets. If you aren’t careful, you could find yourself incentivising someone to do something they were going to do anyway!
Try to find out how your counter-parties are measured and the implications for them if the project happens now or later.
3. Test the waters first
Ask good questions to uncover flexibility before committing to any concessions.
‘Under what circumstances could you sign this off before end of year?’
Just suppose we could be flexible on xyz, could you bring this forward from January to December?’
4. Trade concessions
Don’t forget to make your concessions conditional on them moving their timeframes! For example, ‘if you will agree to sign this off in December, then and only then can we agree to xyz’.