How do you deal with that sales culture that is so cost focused? They want to drive volume; they don’t mind giving good deals to their customers. How do you ensure that that doesn’t get out of hand?

It was out of hand. Under the previous administration, it was forbidden to lose an order and, therefore, there was no marketing department. I said, we need to have a creative tension between sales and marketing. Give me the definition of success, for a salesman. Very simple. Book the order. That is the definition of success, for a salesman. Give me the definition of failure, for a salesman. Lose the order. So if you accept these definitions of success and failure for a salesman, you know that he is not going to be fighting for a better price, unless a pricing increase is imposed. Therefore, you need a creative tension between marketing and sales.

I came from business schools where, for an industrial company, marketing was about the four Ps – product, price, place, promotion. In industrial companies, there is no promotion and there is no place. So what’s left? Product, price. Price, product. You need to have somebody in charge of the price and you need to have somebody who’s preserving the margins. It is not the job of the salesman. Therefore, you need that tension. Somebody else needs to take the responsibility of saying, it’s okay to lose the order. This is what we created. At a point in time, because this culture was so sales oriented, that I imposed price increase and I said, don’t worry, guys, it’s on me. If you lose the business, it’s okay. We need to stop the margin bleeding. We have raw materials coming up. We need price increases; it’s okay.

Guess what? We imposed that and, of course, some of our customers pushed back, because when they pushed back in the past, it worked. Then it stuck and the market got to know that we were serious. Guess what? The competitors said, finally, the leader is raising prices. When you have 5% market share, you can’t be the price leader. When you have 30% market share, it’s not that you can’t, it’s that you have to be the price leader. The poor guy down there is going to be punished, if he has 5% market share. He’s going to say, the big guys are not asking me for a price increase; you are. Out.

He’s waiting for you to raise the prices, the little guy.

That’s the responsibility of the leader. Prices. But you have to make another promise. You say, I’m going to have to restore my margins, but I am also committed to continue my leadership and bring you revolutionary solutions, which make you win, Mr. Customer.

You also took responsibility of that. You made the sales people feel comfortable in, it’s okay to lose the order; it’s on me?

Exactly right. By the way, you have no pricing authority. Somebody is going to tell you the price, you are going to feed back the response, as to what you hear from the market, what’s going on etc. But then somebody – marketing – will tell you whether they are ready for a concession, or not.

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