In brief
- Latin America is a market of salespeople who negotiate with price as the first lever, before talking about value.
- On average, companies capture 30% of the price increases they plan. The rest is lost to discounts, delays and exceptions.
- Every company needs a pricing function: roles, routines and indicators, with a monthly committee led by the owner.
- A discount carries a name, a counterpart and a record in the contract next to the list price.
The interview is in Spanish. This summary is in English.
Ana Salazar, partner at Prisier, spoke with Dan Macías and Tere on their sales podcast, one day after giving a talk in one of their sales training programs. The conversation focused on price within B2B sales: how to respond to the price objection, how to control discounts and how to raise prices without losing customers.
1. A market that negotiates with price
For Ana, Latin America is a market where salespeople became used to using price as the main negotiation lever, without understanding the value the customer perceives. When the sales conversation starts without talking about value, the salesperson is left with only price. Watch at minute 0:00.
Two figures from Ana's talk are mentioned in the episode: 80% of salespeople believe their product is the most expensive in the market, and 70% are wrong. In addition, 95% of experienced B2B salespeople rate their ability to negotiate price as mediocre.
2. Price weighs more than volume
According to Ana, price has between three and seven times more impact on EBITDA than volume sold. On average, 1% more price improves EBITDA by 11%; in transportation, the improvement reaches 30%, and in software and technology, 70%. Watch at minute 4:57.
The same sensitivity works downward. Discounts without a counterpart, contract renegotiations that take time and price changes applied late reduce profit in the same proportion. The price impact on profit calculator estimates that effect with the company's data.
3. Why price creates fear
Salespeople's fear stems from the fact that few companies know how to set prices. In forums with business owners, about one third believe they overcharge, another third believe they undercharge and the rest do not know. Watch at minute 9:16.
| Method | Problem |
|---|---|
| Cost plus margin | It does not tell whether the company is pricing itself out of the market or leaving money on the table, and cost depends on a volume that a new company does not yet know. The buyer is indifferent to how much it cost the supplier to produce. |
| Based on competitors | It hands others the most important profitability lever. |
| Based on the customer | It creates reputation and trust problems, trains customers and salespeople to always negotiate and makes cash flow planning impossible. |
4. How buyers decide
The buyer starts from a need. Among the options that meet it, they choose the one with the best price-value ratio, and value includes functional, emotional, social and transcendent benefits. Those with the same need value the same things and are willing to pay the same. Watch at minute 13:09.
When a customer says "it's too expensive", they are talking about that ratio for their current need. If the salesperson did not identify the need and does not understand the benefits delivered, the only price they can defend is the lowest one.
5. When a deal is lost on price
- Listen with method. The sales force gathers information for product and pricing architecture design: which competitors appeared, which attributes the customer did not value and what it found in the other offer. Often "it's too expensive" means the customer doubts the value will be delivered; the task then is to build that confidence.
- Make the data visible. A Prisier client published a weekly ranking of salespeople by average price and by discount percentage. Every Monday, the manager called the five salespeople with the lowest prices to review their deals. As a result, discounts went down.
- Compare deals won and lost. In B2B and consultative sales, the average ticket of deals won is usually higher than that of deals lost. The useful question is why the higher-priced deals close.
6. The pricing function
Every company needs a pricing function, with defined roles, routines, indicators and responsibilities, even if it does not have a dedicated area. Watch at minute 20:01.
The minimum is a monthly one-hour meeting of the owner or general manager with sales, finance and marketing, dedicated only to prices: what is observed, what is learned and what adjustments to make. In some industries the frequency should be weekly. It is a responsibility the business leader cannot delegate.
7. Perceived value, sensitivity and willingness to pay
To know whether it is overcharging or undercharging, the committee works with three concepts. Watch at minute 22:06.
- Perceived value. How important each attribute is to the customer (24-hour service, fast delivery, dedicated account executive, organic ingredients) and how much they would pay for it. Important attributes the customer does not pay for are the basics of the business.
- Price sensitivity. How many customers leave if the price changes. An initial approximation is to ask salespeople how much sales would increase with a 5% discount.
- Willingness to pay. The size of the customer's budget. An executive transportation company had a highly valued service and was not closing deals: its clients' human resources budget covered 2 dollars per employee and the service cost 7.
8. The opportunity lies in price execution
According to Ana, companies capture on average 30% of the price increases they plan. If the budget plans a 100-peso increase, the income statement shows 30. The rest is lost in additional discounts, implementation delays and customers flagged as priority to whom the increase is not applied. Watch at minute 26:45.
Controlling discounts, execution and product mix can deliver the required price growth without touching the list. At a health and beauty company, Prisier reviewed marketing's final price list against the price rules by channel. Distortions between channels, typing errors (a 97 recorded as 79) and customer margins above the rule added up to 1,700 million pesos in revenue, about 400,000 dollars. Watch at minute 58:40.
9. When to raise prices
There are two main signals. The first, operating at full capacity with very high close rates, when the comparison with the market still leaves room. The second, customers who perceive the value and say the price is low. A cost increase is a signal to review the price, and the decision to raise it depends on the two previous signals. Watch at minute 27:49.
The increase can vary by product. Five products can go up, two can go down and the rest can stay, with a weighted average of 3%. Everything starts from what the price is for: penetrating the market or maximizing repurchase, gaining percentage margin or profit in pesos, defending leadership or gaining market share. Lowering the price is correct if it meets the strategic objective.
10. The right margin depends on the value delivered
In commodities, 5% can be a good result; in other industries the margin can exceed 100%. A commodity company organizes itself to be the most efficient in purchasing, production and logistics. Watch at minute 32:26.
When a product becomes commoditized, value shifts to service. A cement company can charge up to 70% more for concrete depending on the mixer truck's delivery time.
11. Charging for the economic value generated
A pricing model based on economic value measures how much the supplier increases the customer's revenue, how much it saves them in costs and how much risk it avoids for them. The general rule Ana cites is to charge between 15% and 35% of that value; with success-based fees, without a fixed fee, the percentage can reach 60% or 70%. Watch at minute 35:00.
Success-based fees have limits: it is difficult to attribute the result to the supplier, corporate clients tend to reject them and accounting and systems restrictions complicate their operation. They work best where attribution is direct, such as lead generation.
12. Price wars
In a price war everyone loses: companies reduce investment and innovation, lower quality and cut jobs. Many wars start without the company noticing, with discounts to meet the month's quota that are repeated the following month to empty the channel. Some companies are designed to win them, and in those the low price is the entire business model. Watch at minute 38:58.
13. Salespeople who ask for discounts
The first answer is training salespeople to identify needs and buyer types. Buyers who decide only on price are at most between 20% and 25% of an industry. Asking for alternatives, interacting with the product or extending the negotiation are signals of a buyer who values other attributes. Watch at minute 42:05.
When faced with "your price is higher than the competition's", Ana suggests a question: if the price were the same, whom would the customer choose? The reasons for that choice (better technical service, more speed, better quality) are the value that justifies the difference.
If salespeople persistently ask for discounts, there may be a portfolio problem: a single product for all segments. The solution may be an entry version, with less value and a lower price, or a product to attract customers who are monetized through repurchase.
14. How to give discounts
A discount is an exchange in which the customer receives a lower price in return for something the company values. Buying more, buying earlier, paying in cash, trying new products, sharing data for joint marketing or providing better display are valid counterparts. Watch at minute 51:04.
When the discount comes out of a negotiation, Ana recommends two rules:
- Give it a name: first purchase, renewal, frequent customer, new location opening. That way another customer in the same conditions can access the same discount.
- Make it explicit in the contract: list price of 100 and first-purchase discount of 30. At renewal, the negotiation starts from 100.
15. Who decides discounts
Ana sees two frequent schemes. In the first, salespeople have a range and exceptions go to management; after three months almost everything is an exception. In the second, there is no range and each salesperson decides. In Prisier's segmentation analyses, with 70 or 80 variables, the one that best explains the discount a customer receives is the salesperson who serves them, above the customer's size, channel or portfolio. Watch at minute 55:11.
An exercise any company can do is to plot each customer's size against the discount percentage it receives. Points outside the trend, such as small customers with high discounts, are the accounts to correct. The work with salespeople is to prioritize them and set deadlines.
16. Raising the price to sell more
Buyers associate price with quality. A price that is too low raises doubts, like an 18,000-peso wine in a restaurant. Ana cites products in which a 20% price increase raised volume by between 30% and 40%. Watch at minute 1:02:28.
17. Inflation, exchange rate and external costs
In hyperinflationary environments, price is reviewed constantly because willingness to pay changes, and the portfolio serves to keep affordable options. When the company charges in dollars, the customer's budget remains in their local currency; part of the variation is absorbed and part is adjusted to stay within their price range. Watch at minute 1:04:38.
Ana advises against justifying an increase with the dollar, the minimum wage or another external factor, because the customer will ask for a reduction when that factor goes down. The case she recounts is that of her own accountant, who asked for a 24% increase because of the minimum wage increase; Ana answered by asking how much he would lower it for using artificial intelligence. Several industries that charge by the hour or for knowledge will have to review their monetization model. Watch at minute 1:07:12.
Ana closed with her idea of price as a continuous journey, which gets strategy, marketing, sales, production and finance working with a common language.
The underlying method is in how to apply value-based pricing. Prisier's pricing diagnostic identifies where price is lost in execution.
Episode chapters
- 0:00 Intro
- 1:42 Price and profitability
- 6:11 Ana Salazar's career
- 9:16 Why salespeople fear price
- 10:04 Three traditional ways to set prices
- 13:09 How buyers decide
- 16:11 When a deal is lost on price
- 20:01 The pricing function and the monthly committee
- 22:06 Perceived value, sensitivity and willingness to pay
- 26:45 The opportunity lies in price execution
- 27:49 When to raise prices
- 32:26 The right margin
- 35:00 Charging for the economic value generated
- 38:58 Price wars
- 42:05 Salespeople who ask for discounts
- 51:04 How to grant discounts
- 55:11 Who decides on discounts
- 58:40 How much is lost without price analysis
- 1:02:28 Raising the price to sell more
- 1:04:38 Inflation and exchange rate
- 1:07:12 External costs and monetization models
- 1:09:55 Closing
Prisier reviews price execution, discount policy and the pricing function with the sales team.
Let's talk pricing