Escaping the

Discount Trap

Beautiful,” Cora Milano said, looking up at the soaring spires and Gothic arches of the immense charity hospital.

Her colleague, Augusto Tolentino, barely paused. He was in a hurry to get to their meeting—and to make a point to

Cora.

The two worked together at Bosi e

Faora, a São Paulo–based medical device manufacturer. Augusto was ofcially the head of operations, but his real job was as the right-hand man of the company’s diretor presidente, who had informally dubbed him “head of customer satisfaction.”

Cora was the sales director.

Augusto and Cora were on their way to see Sergio Lins, the purchasing director at the Santa Casa de Misericórdia hospital, a few hundred kilometers from the Brazilian capital. Like many of the company’s large customers, this philanthropically funded general hospital aimed to serve as many patients as inexpensively as possible. So

Sergio was extremely frugal, always opting for minimum orders and negotiating relentlessly for low prices.

Augusto had been preparing for the meeting for weeks, because he hoped to change the relationship—and to show

Cora that the new solutions-based selling and pricing strategy that Bosi e Faora had recently adopted with great success for its specialized, wealthier hospitals could work with all kinds of customers. Augusto saw discounting as a sinkhole—just like the ones that opened up in roads all over

Brazil during the rainy season, trapping cars and their drivers. In fact, they’d heard a news report about just such an incident earlier that day, and Augusto seized upon the metaphor to convince Cora.

“That car is like our business,” he said.

“For years, our sales reps have given bigger and bigger discounts to sell more products, and our prices and margins have dropped steadily. The whole company has fallen into the price sinkhole. And as you know, the diretor presidente’s goal is to increase margins by 3%. Solutions selling is the only way to do that.”

But Cora wasn’t at all convinced that a solutions-selling strategy would work for institutions like the one they were about to visit. “I know we’ve persuaded some of our specialized hospitals to spend more on an array of products and services—those

‘touch points’ you love to talk about,” she said. “But general hospitals lack the resources.

They don’t care about our touch points.”

“Cora, with all due respect, we have to overcome that attitude if we want to increase margins.”

“I’m just trying to be realistic,” she responded. “I talk to these people more than you do.”

An Unacceptable Minimum

The solutions-selling idea had originally come not from Augusto but a customer: a São Paulo cardiology hospital run by a charismatic doctor who took a keen interest in the medical device business. A year ago he’d complained to his sales rep about

Bosi e Faora’s lack of engagement.

“We are very engaged,” Augusto retorted when Cora relayed the message. “We’ll sell him anything he wants. Tell him to name the product, and we’ll provide it.”

But the hospital director wasn’t talking only about products. He wanted Bosi e

Faora to help him better serve his patients.

He was looking for ideas.

The rep had none. Neither did Cora.

Out of frustration, the hospital director suggested one of the top of his head:

“Bosi e Faora sells me beautiful, state-oftheart blood-pressure cufs,” he said to the rep. “Could you also sell me inexpensive ones that I can resell to my patients who need to check their blood pressure every day because they’re at risk for strokes and heart attacks? And could you make the cufs electronic so that a nurse can see the data and call the patient if there’s a problem?”

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