Profits are higher when your sales team sides with customers
Profits are higher when your sales team sides with customers
Your sales team should side with your customers during internal negotiations. This leads to deeper customer-seller relations, better customer lifetime value, and higher profits.
Today’s research was published last week in the prestigious Journal of Marketing and is one of the rare studies in B2B, which is typically much harder to study.
It’s based on hundreds of interviews and surveys, cross-matched with pricing and profit data. The findings were then validated in controlled experiments.
Salespersons with a dual role of advocating both you and customers generate higher profits
Impacted metrics: Customer spending | Customer acquisition | Customer lifetime value
Channels: Sales team
Tip type: New research (January 2021)
Previous tip: 365 days or 1 year? Smaller units are more credible (All tips here)
Recommendation
In B2B sales negotiations, your salespersons shouldn’t only represent your firm. Instead, they should advocate for both:
Your firm towards the customer (e.g. “Given your needs, our solution is the best for you”)
The customer towards your firm (e.g. “We should really give them that discount they asked. It will pay off in 6 months when they launch their new product, expand their team, and spend more”)
Even when discounts or other concessions are not granted to a customer, you should let the customer know that the salesperson genuinely advocated for them (e.g. the sales or pricing manager should mention it along with the refusal).
You should also encourage the development of personal ties between the salesperson and the customer so they get to better understand their needs.
Effects
Salespersons generate higher profits when they advocate customer’s interests during customer-seller negotiations, not only the interests of their firm (the seller).
For salespersons, this cooperative dual role is likely more satisfying and less stressful.
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Why it works
Representation of customer interests by the salesperson: Develops a much deeper customer-seller relationship -> Increases customer lifetime value -> Offsets the cost of any special discounts or concessions granted -> Results in higher overall profits.
Limitations
This research focused on firms where salespersons don’t have the authority to independently grant discounts. The findings should still stand when they have authority to give a limited discount (e.g. 5%) but it’s unclear what happens when they have unlimited authority (without the need for approval from a sales or pricing manager).
Companies using this
Many B2B companies have already shifted to understanding and adapting to their customers’ needs, rather than stubbornly standing their ground (e.g. on pricing) in an ‘us vs them’ mentality.
At the same time, how much individual salespersons should stand up for their customers has often been left up to chance or individuals.
Steps to implement
Your sales team should go far when advocating internally for your customer, to the point that they represent the customer during internal negotiations. When they speak to the customer, they go back to representing your firm.
To implement this approach, train your sales team as well as managers and stakeholders who may otherwise view it with suspicion (e.g. as divided loyalty of the salesperson).
Study type
Market observation and experiments, in-depth interviews, and surveys. United States
Source
Lawrence, J. M., Scheer, L. K., Crecelius, A. T., & Lam, S. K. (January 2021). Salesperson Dual Agency in Price Negotiations. Journal of Marketing.
Affiliations
Spears School of Business, Oklahoma State University; Robert J. Trulaske, Sr. College of Business, University of Missouri; Ivy College of Business, Iowa State University; and Terry College of Business, University of Georgia. United States.
Remember: Because of the groundbreaking nature of this paper, it could be disproven in the future (although this is rare). It also may not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.
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