Aligning the pricing & sales organizations of a $7B enterprise

A Case Study

Business type: Software development
Industry: Automotive
Product: Software for car dealerships
Result: Projected 55% increase in revenue YoY

The Challenge

Substantial churn is an issue that many businesses face when markets are volatile. It can be an indicator that quantified value of the product is not clear—or not articulated well to the customers. This was the case with our $7B software client who engaged in a project with two additional objectives: (1) to recommend pricing for a new product introduction and (2) to train their sales force to negotiate with that new pricing more effectively.

Our Approach

Our team began by conducting a pricing assessment. Like many large enterprises, substantial data existed, but the company’s internal teams hadn’t been able to turn that data into actionable insights for the sales team. We learned that the value delivered to customers greatly outweighed what was being charged for the products.

The client was stunned by how much value they generated for their customers. The team often heard from customers that they provided a commodity (a common tactic to get lower prices), but it turned out that this was far from the truth.

We recommended a price increase of 168% to better match value and price. Concerns immediately rose: How would they re-price solutions with current customers? How would they convince the customers? Could they really have those conversations?

To tackle the pushback on the significant price increase, we needed to shift gears from “set price” to “get price.” This included shifting mindsets, too.

We call this the last mile of pricing—executing through the sales team. Many enterprises face extreme pressure when making major price changes, including customer pushback and demands for discounts and promotions which leads to loss of revenue and decrease in profit margins. Enter: Negotiating with Backbone application workshops.

60 cross-functional team members completed the training over the course of three months. While our focus was on the sales teams, we needed to include support functions with varied seniority levels in order to uncover value together and ensure they were confident and able to have “hard” conversations with customers about the price increase.

We needed to ensure that the teams understood the customer better. The business impact of that understanding included minimizing price leakage and finding ways to leverage value to increase revenue, profits and share of wallet—while delivering more value to the customers in the areas that mattered most to them.

Shifting Mindsets and Quantifying Value

To eliminate discounting, sellers need to be able to define the value delivered and defend that value effectively during pricing negotiations. The value must be quantified and calculated quickly—keep it simple and use an outside-in mindset.

Simplicity is key. Value cannot be properly communicated or defended with robust spreadsheets or complex calculations. In the Negotiating with Backbone session, participants calculated their solution’s value within minutes using our framework while working together to push their thinking. As a result, they surprised themselves with huge numbers of unexpected value, such as:

• 82x ROI on a $600 product with one customer – and the seller said “I don’t think we are charging enough”
• $18m in value delivered to the customer’s bottom line with a $500k investment
• $7.5m profit improvement by using a $40k new solution

Negotiating with Backbone

With new value-based calculations and a new outlook on their pricing, the teams then learned to withstand pushback and client pressure. We created mock selling scenarios to coach them through predictable upcoming negotiations, and they learned to identify tactics that had previously been used against them for discounts and promotions.

Most importantly, the teams learned to hold the line on fair pricing and collaborate as an aligned organization. They learned to sell more effectively and in ways that ensured their customers were paying for the value they were receiving, including promoting adoption of new products.

The critical mass of 60 commercial team members transformed over three months with new thinking, new behavior, and the team is well on their way to significant increase in revenue and profitability.

Client testimonials from this project

“Our teams are collaborating on cross-BU sales and they were not before this training. Account managers and sellers are also working together to truly understand our customers and buying centers.” VP Sales

“[Backbone] helped increase collaboration with the larger BU team. We got comfortable being silent during negotiations. ‘The ball is in your court, you know what is on the table, this is what we are offering, let us know what you want to do.’” Sales Director

“We were working on a deal with a poker player. We walked away, and they actually came back to us. We used Give-Gets to force them to decide in our time frame and secured the deal.” Sales Director

“We identified that we were in a sales scenario with a big opportunity with no chance of winning - when someone asked for a price without a conversation with the decision maker. We had a tough exchange with them that it wasn’t the way we worked, and we refused to send over the price. We ended up getting the meeting with them.” VP Sales

“Our team is learning different ways to analyze a current client’s performance to help tailor messages about how we increase customer profitability. This gives us an opportunity to navigate away from discounts and giveaways.” VP Operations