Managing Your Sales

Keep in mind that vendors don't work with a common schedule, format or pricing model. It's unrealistic to expect them to coordinate anything with their channel partners. The result: VARs are resigned to an endless flurry of product and pricing changes from their upstream vendor partners. Often, vendors don't consider the costs of frequent price-list revisions. Each vendor has a product-management group that tries to boost revenue, deal with special customer requests and add new offerings to that company's portfolio. There's always room for improvement, clarification and more detail. This encourages product folks to do a lot of tinkering on the margins with their price lists. They may be forgetting the "consumers" of price lists, though: your sales reps (who sell their products) and your customers (who wonder what to buy). Complicated pricing models may be self-defeating.

Publishing Isn't the End
Sitting in their corporate ivory towers, it's easy for vendors to imagine that publishing a new price list is the completion of a process. They have gone through intense internal negotiations among their sales, engineering or marketing folks, and finally have come to some agreement. At 10 a.m. on a Tuesday, they formally post a new price list to the company extranet and begin mailing it out to key resellers. Solution providers know, however, that the real work has just begun.

Throughout the channel and customer base, there are outdated price sheets floating around--not just the most recent one, but four or five generations of out-of-date product numbers and configurations and prices. Some copies are pinned to cubicle walls, others are laminated in binders or stapled to slow-moving customer proposals. Even though these are legally invalidated by the new version ("effective immediately, supercedes all previous"), the world doesn't come to a halt.

Here's what to expect, then, from your vendors when they issue new price lists. If they're not offering this checklist already, speak to them about the following:

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Keeping It Simple
At the same time, be cautious of potential pitfalls that could signal a red flag.

One big problem is an overly complicated price list. This may be a reflection of an overly fussy pricing model that has too many dimensions. ("For 50,000 transactions per month or less, the per-seat charge plus the per-server charge apply except when the customer wants a site license...") Mere mortals will never get it right, even with 100 pages of examples.

Similarly, complex price lists may be the accumulation of different usage scenarios. Vendors may try to sell the same software to many different markets, using a half-dozen different pricing models (e.g., "For hosted applications, see page 3." "For pay-per-transaction customers, page 4." "One-time licenses plus annual maintenance on page 6."). In the real world, it's very difficult to define the exact boundary between hosted and leased software, forcing every large sale to go back to the vendor for review by Talmudic scholars.

Out in the field, where your sales teams wrestle to bring in revenue, pricing should never be the focus of a sales call. You want your reps to spend prospects' precious time on benefits, solution selling and creative problem-solving. As soon as pricing becomes the focus, the sales team loses its ability to sell value. Here's a look at three hypothetical customer conversations about an accounting package, starting with the worst-case example:

Sales rep: "...85it includes general-ledger integration, Sarbanes-Oxley reporting, automatic calculation of federal and state depreciation...and meets all of the requirements you've listed in your strategic overview."

Customer: "Great. How's it priced?"

Sales rep: "Well, depending on whether you choose the server-based option with concurrent licensing or the per-seat ASP hosting approach, and estimating your usage at 500 to 1,000 completed transactions per week plus 200 MB of downloaded reports and partial support upgrades..."

Customer, unspoken: "My head hurts, and I'll have to run every scenario myself to see which is the best deal."

Clearly, the vendor's pricing masterpiece is alienating customers. Less astute prospects will walk away, and savvy ones will get several competing bids to see which VAR can find the lowest-priced model. You don't need this kind of grief. Here's another example of a bad approach:

Customer: "Great. How's it priced?"

Sales rep: "I have the Nov. 25 price sheet, and it was $215 per seat per year plus options, but there may have been some changes since then. When I get back to my desk, I'll check the online version, call the vendor and send over a quote."

Customer, unspoken: "I wonder if this guy is disorganized, dishonest or doesn't resell enough of this product to stay informed."

To avoid this, you'll need to manage price-list distributions better and work with sensible vendors. Don't leave your reps to dangle in conversations like that. Here is an example of a good approach:

Customer: "Great. How's it priced?"

Sales rep: "It's roughly $200 to $240 per seat per year, depending on the options."

Customer: "OK. I'd really like to see you demonstrate the interface with our existing warehouse systems..."

Your team sold solutions and benefits. Pricing was never the focus and didn't confuse anyone. Pricing models and details stayed where they belong: quietly in the background. Price lists are an unpleasant, inevitable part of reselling products.

You'll need to work with your vendors to keep them from getting in the way.

Helping Your Vendors Help You
Keep your reps selling benefits instead of pricing models. Consider:

Rich Mironov ([email protected]) is vice president of marketing at AirMagnet, a vendor of Wi-Fi security and performance-management solutions.