This document outlines strategies for sales and pricing. It discusses the differences between marketing and selling, how products impact the sales process, and factors to consider like distribution channels, sales approaches, and motivating buyers and resellers. Pricing strategies like skimming, penetration, and premium pricing are covered. The document also explains how channels can affect pricing margins and gives examples of pricing tactics and psychological effects.

1. Sales & Pricing Strategies
Lawrence Kirsch
Marketing & Management
Consulting
760-845-1633
www.LawrenceKirsch.com
Larry@LawrenceKirsch.com

2. Agenda
• Marketing Versus Selling
• Product / Service Requirements
• The Sales Process
• The Distribution Channels
• Your Sales Approach
• Pricing Strategy

3. Marketing Versus Selling
Marketing
• Everything you do to Reach &
Persuade prospects
Selling
• Everything you do to close the sale
and get a signed agreement or
contract

4. Marketing Comes Before
Selling
• Knowing Your Market – Size,
Segments & Trends
• Understanding Their Wants & Needs
• Identifying The Most Appropriate
Message

5. Selling Is A Part of
Marketing
Direct Mail
Sales Website
Email
Marketing Trade
Shows
Print Ads

6. Selling Is A Part of
Marketing
Selling Focuses On…
• Engaging the prospect
• Moving the prospect through the sales
process
• Closing the sale
• Managing the account

7. Sales Strategy Follows
Marketing Strategy
Marketing determines the audience
(direction)
• Industry
• Markets (sub
markets)
• Audience (size,
location, etc.)
• Message

8. Your Product / Service
Impacts Your Sales Process
If it is Complicated, Expensive or
New…
• Takes more time to explain
• Takes more time to understand
• Make take longer to complete the
sales cycle
Note: The Distribution
Channel has needs too.
(More on that later)

9. Your Product / Service
Impacts Your Sales Process
This will influence your Sales
approach…
• Can marketing close the deal alone?
• What sort of “selling” is required?
• How much “follow-up” is needed?

10. Your Product / Service
Impacts Your Sales Process
Loyalty
Program
for 4 and
5-Star
Hotels

11. Your Product / Service
Impacts Your Sales Process
Loyalty
Program
for 4 and
5-Star
Hotels

12. Your Product / Service
Impacts Your Sales Process
Cost of Sales (estimates):
• Telemarketing = $70 / per
sale
• Web-based sales = $30 /
per sale
HMC wanted their Website to make the
sale

13. Your Product / Service
Impacts Your Sales Process
What HMC found was:
• It was a fairly complicated message
• There were a lot of questions that
came up
• And trained telemarketers would
close far more often then the
website

14. Your Product / Service
Impacts Your Sales Process
So they went back to Telemarketing
And used the Website to improve their
renewal rates
• Current renewal rates = 52%
• Using Website / Email contact - better
communication = increased renewal
rates
• Increase goes right to the bottom line

15. Know The Sales Process
Who are the prospective players?
• Influencers
• Decision Makers
• The Buyers
• They have the authority to purchase

16. Know The Sales Process
How do they make decisions?
• Presentations to…
• One Individual?
• Several Individuals at different times?
• Committees? / Others?

17. Know The Sales Process
What do they expect of you?
• Samples?
• Proposal?
• Presentation?
How much “handholding” will they
need?

18. Know The Sales Process

19. Know The Sales Process
What is their Timing?
• Buying now?
• If later… When?
Is there a buying cycle?
• Certain months / quarters?
(Based on their selling cycle)

20. Know The Sales Process
Do they have a budget?
• Yes
• No
• Kind of…
• We’re not telling…

21. Know The Sales Process
Do they expect special terms?
• 2/10, Net 30 (take the 2% - pay in 30?)
• Net 45 / Net 60 / Net 90?
• Free Shipping
• Free Warehousing
• Free Product

22. Know Your Distribution
Channels
• Business to Business
• Business to Consumer
• Business to Government
Note: Each Channel Has Needs
Also…The Channel Impacts Pricing

23. Industrial Marketing Channels
0-level 1-level 2-level 3-level
Manufacturer Manufacturer Manufacturer Manufacturer
Manufacturer’s Manufacturer’s
Representative Sales Branch
Industrial
Distributor
Industrial Industrial Industrial Industrial
Customer Customer Customer Customer
23

24. Consumer Marketing Channels
0-level 1-level 2-level 3-level
Manufacturer Manufacturer Manufacturer Manufacturer
Wholesaler Wholesaler
Jobber
Retailer Retailer Retailer
Consumer Consumer Consumer Consumer
24

25. Your Sales Approach
Who is making the Sales Calls?
• You
• Inside Sales Staff (Part or Full Time)
• Company Field Sales Staff
• Manufacturer’s Representative
(Independent Sales Agent)

26. Your Sales Approach
If You are making the calls…
• How much time per day?
– Cold Calling / Responding to RFQs
– Following Up (letters / emails / calls)
– Generating New Leads
– Paperwork?

27. Your Sales Approach
If Someone Else is making the
calls…
• How effective are they?
– Cold Calling / Responding to RFQs
– Following Up (letters / emails / calls)
– Generating New Leads
– Paperwork?

28. Your Sales Approach
Structure Your Sales Team according
to the Nature of…
• Your Products / Services
• The Channel of Distribution
• The Selling Cycle

29. Evaluating Sales Approach
Alternatives
East Coast Manufacturer of Test
Equipment
• Looking to expand in the west
coast
• Whether to hire 10 sales
employees…
• Or utilize a Rep Agency (with 30
sales people).
29

30. Evaluating Sales Approach
Alternatives
East Coast Manufacturer of Test
Equipment
• Economic Criteria
• Control Criteria
• Adaptive Criteria
30

31. Evaluating Sales Approach
Alternatives
East Coast Manufacturer of Test
Equipment
• Economic Criteria
Initial costs – future costs
Efficiency in prospecting / selling
31

32. Evaluating Sales Approach
Alternatives
Economic Criteria
Selling Costs (&)
Manufacturer’s
Rep
Company’s Sales
Force
Level of Sales ($) SB
32

33. Evaluating Sales Approach
Alternatives
East Coast Manufacturer of Test
Equipment
• Control Criteria
Degree of focus on the
manufacturer’s products
33

34. Evaluating Sales Approach
Alternatives
Manufacturers’
Representative
34

35. Evaluating Sales Approach
Alternatives
East Coast Manufacturer of Test
Equipment
• Adaptive Criteria
The need to respond quickly
to changes in the market and
competitive pressures
35

36. Evaluating Sales Approach
Alternatives
Whatever The Decision, You
Must…
• Train the Sales Team
• Motivate the team and
channel
• Continually evaluate the sales
approach
36

37. Pros & Cons Of Sales Teams
Sales Employees
Pros Cons
Product Knowledge Initial Salary Costs
Product Focus (Yours) Expenses / Auto / Etc.
Easy Access to Customer Lack of Market Access
Feedback (Especially New Markets)
Complete Control Over May need to Train Staff
Sales Process Regarding Selling
37

38. Pros & Cons Of Sales Teams
Manufacturer’s Representatives
Pros Cons
Industry Knowledge Representing Other
Products
Access to Key Buyers Less Control of Sales
(Established Relationships) Process
Low Start-Up Costs Difficult to Keep Track
Pay When a Sale Is Made Less Access to Customer
Feedback
Access to New Markets
38

39. Motivating The Channel
Push Strategies
A strategy that entices your Channel to sell
your products versus other manufacturers.
Push strategy examples are:
• Travel incentive programs (all-expense-paid
trip)
• Merchandise programs (televisions, sporting
goods, clothing and gourmet foods)
• Training programs (increase salespeople's
comfort level with your products). 39

40. Push Strategies
• Monetary SPIFFS (special promotional
incentive factory funds) Example: Next 30
days, you will pay $30 per unit SPIFF
bonus for each case sold.
• Special discounts or allowances.
Example: Next 60 days, new customers
receive additional 10% discount.
• Local COOP advertising efforts (direct
mail, exhibitions, space advertising) –
provide $ to support advertising efforts. 40

41. Push Strategy
41

42. Motivating The End User
Pull Strategies (Marketing)
A strategy that motivates the end user to
approach your channel of distribution and "call
out" for your product. Pull strategy examples
are:
• Space advertising in leading publications
• Media releases announcing new value offers
or features
• Rebate programs offering a limited-time,
factory-issued cash rebate to end users
42

43. Pull Strategies
• Direct mail campaigns targeted at
qualified individuals who request further
contact.
• End user Seminars conducted by your
staff
• Telemarketing efforts that can capture
qualified sales leads
• Internet exposure via a Web page
• Radio and television advertising
43

44. Pull Strategy
44

45. Training The Channel
Microsoft: Reseller Training Program -
• Requires third-party service engineers to
complete a set of courses and take
certification exams.
• Those who pass are formally recognized
as Microsoft Certified Professionals –
and can use this designation to promote
business.
45

46. Your Pricing Strategy

47. Economic View of Pricing
47

48. Marketing View of Pricing
Quality
Low High
P Low
Economy Penetration
r
i
c
e Skimming Premium
High
Pricing Strategies Matrix 48

49. Marketing View Details
A high price set because of product or service
Premium uniqueness. Requires substantial competitive
Pricing advantage to be sustained.
Penetration An artificially low price set to gain market share.
Pricing Once share is achieved, the price is increased.
A “no frills” low price is set. The cost of marketing
Economy and manufacturing are kept at a minimum.
Pricing Typically, a follower strategy.
A non-sustainable high price is set which limits
Price market but recoups trail blazing investment
Skimming faster.
49

50. Pricing Tactics
Used when the marketer wants the consumer to
Psychological Pricing
respond emotionally. Example $29.95 cents.
Used to get the customer to buy more than one
Product Line Pricing
product—a wash, a wax, etc.
Optional Product Pricing Extras are discussed once the initial purchase is set.
A low price is charged for the product. But premium
Captive Product Pricing price is charged once the consumer is captured.
Example printers and printer cartridges / razors.
Promotional Pricing Buy One, Get One Free
Geographical Pricing Pricing varied to markets and regions
A bundle helps the customer solve a combined need
Solution Pricing
– a mop head and the handle.
The McDonald’s Value Meal. Allows different offers to
Value Pricing
be made to different audiences

51. How Channels Affect Pricing
Consumer Market:
You sell directly to the End User via your website.
Your Cost is $5. Your Retail Price is competitive at $20 (giving you a profit
margin of 75%).
Company
Manufacturer End User
Website
Your Cost: $5 Sell Price: $20 Purchase Price:
$20
You’re making $15 on each unit: 75% profit margin
51

52. How Channels Affect Pricing
Later, you decide to sell through small retailers – requiring the
services of a Distributor. You want to maintain your 75% profit
margin.
Wholesaler /
Manufacturer Distributor Retailer End User
(takes title)
Margin: 75% Margin: 35% Margin: 50% Purchase Price:
Your Cost: $5 Purchase: $20 Purchase: $30.77 $61.54
Sell Price: $20 Sell Price: $30.77 Sell Price: $61.54
At a retail price of $61.54, you have effectively priced yourself
way out of the market. The channel would never support this.
52

53. How Channels Affect Pricing
In order to meet the competitive $20 retail price, and to
accommodate the required channel margins, you will need to
reduce your wholesale price.
Wholesaler /
Manufacturer Distributor Retailer End User
(takes title)
Margin: 23% Margin: 35% Margin: 50% Purchase Price:
Your Cost: $5 Purchase: $6.49 Purchase: $9.99 $19.98
Sell Price: $6.49 Sell Price: $9.99 Sell Price: $19.98
Instead of a 75% margin, you now can expect a 23% margin.
53

54. How Channels Affect Pricing
Include an independent sales rep agency, and you can expect
your sales costs to increase. The Rep Agency will expect a 10%
commission on any sales to Wholesalers.
Manufacturer Wholesaler /
Sales Rep Distributor Retailer End User
(takes title)
Commission: 10%
Margin: 13% Margin: 35% Margin: 50% Purchase Price:
Purchase: $6.49 Purchase: $9.99 $19.98
Your Cost: $5.65
Sell Price: $6.49 Sell Price: $9.99 Sell Price: $19.98
Instead of a 23% margin, you now can expect a 13% margin.
54

55. The Apple Retail Store
Effectively supports a “high-end”
pricing strategy
• Control the message
• Control the environment
• Provide opportunities to learn about
and sample products
• Have knowledgeable people
available to answer questions
55

56. Factors To Consider
Inelastic Demand Elastic Demand
$15 $15
Price
$10 $10
133 150 50 150
Quantity demanded per period 56

57. Conditions
Inelastic Demand
• Few or no competitors
Sales • Buyers don’t notice
$15 $1,995 higher price
Price
• Buyers slow to change
habits
$10 $1,500
• Buyers think higher
prices are justified by
quality, etc.
133 150
Quantity demanded per period 57

58. Factors To Consider
Elastic Demand
If Demand is Elastic, Sales
• Sellers will consider $750
$15
lowing their price.
Price
• A lower price will $1,500
produce more total $10
revenue.
50 150
Quantity demanded per period
58

59. Anchoring Effect
When making purchasing
decisions, we tend to rely too
heavily on the first pricing
information offered (the "anchor").
Anchoring occurs when we use an
initial price to make subsequent
judgments.
59

60. Anchoring Effect
Example: The iPad
During Steve Jobs’ presentation
he refers to the pundits suggesting
a price under $1,000 (or $999).
But reveals a starting price of
$499.
60

61. 61

62. Pricing – The Decoy Effect
Or Asymmetric Dominance Effect
The phenomenon whereby
consumers will tend to have a specific
change in preference between two
options when presented with a third
option.
62

63. Pricing – The Decoy Effect
Example: A Subscription
Research suggests consumers
offered a choice between (for
example) a $59 Internet-only
subscription and a $125 print
subscription will generally opt
for the Internet-only option.
63

64. Pricing – The Decoy Effect
Example: A Subscription
However, if there’s a choice between:
• $59 Internet-only
• $125 print-only
• $129 print and Internet combined
More people will choose the priciest option.
The $125 middle ground exists to make the
$129 deal look cheaper by comparison, not
as a serious choice. 64

65. Sales & Pricing Strategies
Lawrence Kirsch
Marketing & Management
Consulting
760-845-1633
www.LawrenceKirsch.com
Larry@LawrenceKirsch.com