When you are coming off a slow period, it is very important to build up positive momentum and to do it fast. The old saying, "Nothing succeeds like success" takes on an even more critical role for every organization trying to rebound from a slump. And most entrepreneurial sales management professionals know that there is no better month than January to launch efforts to get ahead of year-to-date sales projections.
Many organizations offer January "spiffs" to their salespeople. The reasoning is that once ahead of their personal sales goal, these folks will work even harder to stay ahead. "Staying ahead" being analogous to making more money. Other companies use customer time-based incentives to jump-start sales.
These are incentives that a customer can take advantage of only if a purchase takes place in a defined time period. The idea here is to pull purchases forward, to artificially accelerate the need. Some companies will combine both of these programs. This year, however, I suggest that these traditional fast-start initiatives cannot succeed.
Most business people will attest to the fact that we are in the midst of a buyer's market. Just accepting this will help to avoid a lot of wasted time and energy in trying to improve a selling cause when, in fact, it might be a selling effect. All the selling spiffs in the world will have no positive impact on a selling organization in an uncertain price environment.
Uncertainty is the great selling obstacle out there. You only have to look at the recent retail pricing trends during the holiday season and take notice of a few facts. Lower prices, as long as there was an expectation of even lower prices, did not stimulate sales. Only when the uncertainty of a further price reduction was offset or balanced by the pleasure of "getting a deal," did you see even a glimmer in an uptick. Indeed, some consumers felt that the significant discounts being offered indicated that they were previously being gouged and taken advantage of.
This reality and awareness of desperation pricing is not going to go away for quite a while. The challenge now is how do we operate in such a margin-squeezing environment?
Our mantra for survival and an opportunity to prosper is founded on an understanding that "effective" means first and foremost positive cash flow.
Positive cash flow depends on sales, which depend on resolving consumer pricing uncertainty. So why not just give your customer the solution to his uncertainty by acknowledging the issue and then resolving it in favor of both of your?
Simply guarantee that should your price decrease in the defined future, they will be entitled to a financial adjustment. If they buy a product for $100 from you and next month you have to lower your price to $90, then they would receive a $10 adjustment.
This adjustment could be cash, it could be a credit off their next purchase, it could be under the guise of a number of different packages depending on your company's capacity. The issue here is, all things being equal, you have removed the uncertainty of waiting to purchase based on getting a better price.
At the same time, you've significantly increased the probability of generating short-term cash. In today's business climate, both of these are important considerations for every entrepreneurial manager.
John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes each Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at email@example.com