It’s no secret that manufacturers are up against massive industry disruption. Look at global export figures alone — this visualization embedded in this Wall Street Journal article speaks volumes. The competitive positions of China, Germany, U.S., Japan and South Korea have drastically shifted since 1990. Given the disruption, company leaders are scouring for the next innovation to boost productivity, and more importantly, profitable sales. Will it be 3D printing? The Internet-of-Things? Or, perhaps, intelligent underwater robots? These technologies are undeniably cool and their proliferation may be inevitable, but growing sales and profits doesn’t require flashy technology.
It may be surprising, but manufacturers stand to make significant P&L gains by overcoming the decision complexity in their businesses. To stave off the negative effects of disruption, manufacturers have merged, acquired, diversified and expanded to stay afloat. All of this activity has created massive complexity within the organization in terms of products and customers.
An unintended consequence of this growth is the reduction in sales execution effectiveness. The ramifications of less-than-effective sales execution? Poor decision-making which, in a fast and complex sales environment, can both erode margins and decimate revenues. However, company leaders can reverse the negative trend by improving how their sales force answers three critical questions: which customers to call, what products to pitch, and what prices to quote. Let’s explore how these questions are typically addressed and how prescriptive solutions stand to disrupt the status quo of decision making in the manufacturing industry.
Prescriptive Guidance to Grow Profits: What Prices to Quote?
Manufacturers often set prices in terms of a target margin percentage, cost-plus or list-minus. Consider this: When costs are rising, most manufacturers simply raise prices across-the-board using simplistic rules. This usually results in lost revenue without achieving the margin goal, as customers either negotiate down the price increase or buy from another supplier.
Making matters worse, an overly-simplistic approach to pricing hinders sales reps’ ability to quickly, efficiently and accurately quote prices to customers. Without deal-specific guidance, sales reps tend to over-discount on approximately 50 percent of transactions. Conventional wisdom suggests that companies should add more approval layers to price quotes or use analytics to see where pricing mistakes were made. But, this just exacerbates the underlying issue and creates a backlog or pricing exception requests, slowing quote turnaround times. When using manual analysis, there are too many pricing decisions to be made and too many variables to consider for sales reps to quote profitably each and every time.
Prescriptive pricing applications are disrupting the status quo of price setting by enabling manufacturers to set specific, market-aligned prices that account for every selling circumstance at the micro-market level. These applications put the company’s pricing experts in control, allowing them to understand how pricing strategies will impact future P&L performance before putting prices into market. The output of this model is market-aligned, deal-specific price guidance which can be delivered to sales reps in the quoting systems they use today. With simple, deal specific price guidance, reps spend less time haggling over price and more time doing what they do best — selling.
Prescriptive Guidance to Grow Sales: Which Customers to Call? What Products to Pitch?
Considering the unpredictable nature of the industry, companies can gain significant leverage by improving organic growth within existing customers. This starts by helping sales reps identify customers with the greatest propensity to defect, or those with the potential buy more. However, sales reps have increasingly large books of business and it’s difficult for them to know where these opportunities to expand wallet share exist, or which customers are beginning to defect to competitors.
Decisions about who to call and what products to pitch are largely a byproduct of habit and intuition. Sure, for the top 20 percent of their accounts, sales reps are likely able to spot when a buyer is cherry-picking. What about the remaining 80 percent? The sheer volume of customer-product combinations is beyond a human being’s ability to process and discern meaningful patterns. The result is missed opportunity after missed opportunity to capture more wallet share.
On the surface it would seem that the answer is bringing in a team of analysts to produce reports that sales reps can use to identify cross-sell and retention opportunities. The issue is that reps simply don’t and won’t read these reports; they aren’t analysts and they don’t have time to translate a spreadsheet into actionable insights. The reports go stale and sales reps are still unsure where retention risks and opportunities for wallet-share expansion exist.
Prescriptive selling applications can identify and distribute customer- and product-specific retention and growth opportunities. Data science is leveraged to compare customers’ current spend with what they should be and were buying, revealing thousands of actionable sales opportunities. No deciphering of reports required.
Prescriptive selling guidance can cut through the decision complexity inherent in modern manufacturing and present a new paradigm for manufacturers. One where sales and profit growth doesn’t depend as much on external factors, and instead, harnesses existing company data to tap into the opportunities for revenue and profit that already exist within the business.
Barrett Thompson is the general manager of pricing excellence solutions at Zilliant.