At least half of CFOs report cost pressures from escalation in wages, raw materials, freight and salaries. And those of us living on the commercial side of this pressure cooker know what this does to profitability. Here’s another gem: 41% of CFOs fear that the lack of supply chain resilience will make associated cost increases more permanent than temporary.
While it’s an interesting data point in and of itself, the fact that most CFOs are looking at the current price escalations (that we as commercial professionals drive) as temporary increases gives us a preview of the pressure to come when the inflation punch bowl is finally empty. This also makes it that much more critical for us to prepare sellers with the right talking points before, during and after the increase to maximize how much of it sticks.
For example, most companies are already numb to inflation-related increases happening today so it’s not a surprise that so many of our price announcements reference this. But be sure your sellers don’t fall into the fatal trap of tying anything back to specific raw materials, supply chain issues such as freight/logistics or other things easily indexed. And for goodness sake, don’t put it in your written announcement! Inevitably in doing that you will find a price anchor around your neck when these costs ebb. Don’t leave this to chance.
Even your most seasoned sellers need support here and the right market messaging as air cover. If you have the privilege to lead your commercial function, here’s some more food for thought. It’s absolutely critical in this environment to help sellers prepare and stay sharp. No matter how experienced or street-smart, no one is equipped to manage this firestorm without proper preparation and tools. There is no autopilot—yes, some sellers are better than others but it’s never been more critical to be sure your people are supported with the right critical few tools in a ruthlessly simple process.
Here’s some more for your plate. Most leaders have deployed some form of negotiation training for their commercial teams and have even provided coaches, often beyond the first line sales managers. Many are tapping into their own purchasing/procurement organizations to share insight from the other side of the negotiation table.
Been there, done that, right? Many have also set up “Deal Desks” to accelerate and control the flow of value-based discussions that enable a seller to close within the strike zone of your own defined targets for price, terms and conditions. Check. Similarly, companies have set up more streamlined resources for customers to quickly and effectively get help from your commercial team (and if you think that’s happening in person, think again #omicron). Are you THAT digital yet?
For those that had Deal Desks already, several have narrowed the strike zone and made it harder to get exceptions to further curtail a typical seller knee-jerk to offer a discount, rebate, back-end credit or some other price element that negates the increase you’re trying to drive (you know it happens…). Finally, now is a really good time to have clear visibility to your pocket price at the account level so you know exactly where any profitability leakage is happening. Do you?
And, don’t forget, once you develop your key talking points associated with price increases and any other needed market messaging, be sure you’re following up with sales team training where the talking points are reviewed, techniques are shared and role plays conducted. Role plays? Seriously?? Yes, role plays. You need to be sure sellers are communicating the right level of information at the right time without surprising, apologizing, laying blame or other common self-inflicted seller conundrums. You’d be surprised how much even the most seasoned professionals will struggle this.
Assume nothing in the current commercial version of Alice in Wonderland.
OK, pushing this plate of food for thought away for now. Next up: digital in sales. You need it more than you think…
The Gartner Blog Network provides an opportunity for Gartner analysts to test ideas and move research forward. Because the content posted by Gartner analysts on this site does not undergo our standard editorial review, all comments or opinions expressed hereunder are those of the individual contributors and do not represent the views of Gartner, Inc. or its management.