Senior Sales Professionals Interview Questions. Part III

Why mastering Costing, Pricing, and Forecasting is crucial in Sales Interview?

Senior-Level sales professionals are the masters of closing deals. They forge relationships, translate needs into solutions, and ultimately, drive revenue. But beneath the surface of sales presentations and pitches, lies a silent battleground: the battlefield of numbers.

Costing, Pricing, and Sales Forecasting are not mere buzzwords tossed around boardrooms. They are the alchemists’ tools, transforming raw data into the gold of profitable decisions.

In this article, I am listing out five testing Sales Interview questions. Preparing them will help you delve into

— The Indian market’s unique challenges,

— Hidden complexities of costing in a globalized world, and

— Challenges of forecasting in the economic ups and downs

This is not a hand-holding exercise in basic accounting principles. Rather, a deep dive into the nuances. Read on to crack the Cost-Price-Profit puzzle.

Table of Contents

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Question – 01: Can you describe a situation where you used cost analysis to improve the profitability of a sales deal?

This question needs your attention, and you have great scope to impress the panel.

There are three parts. There was a Sales Deal. The deal was profitable, irrespective of who closed it. Then you did some cost analysis. The profitability increased with your effort. Along with a potential profit, the deal had some challenges. This is the premise.
So, start with an interesting real life example. Describe the customer, their specific requirement and your initial techno-commercial proposal.
Then talk about the trigger, which pushed you for a cost analysis. This is the most crucial part of your answer. Some examples of trigger are (not limited to)

Profitability concerns

— Intense competition and aggressive bidding by competitors

— Raw Material Price Hike

— Tight margin

— Unpredicted Logistics Cost

— Labour Cost

— Phased payment collection

— Long Credit Term with customer

— Avoidance of under-pricing and end up with a loss-making deal

— Any Regulatory or taxation change; or interest, penalty etc.

Risk Concerns

— Inaccuracy in initial cost calculation (this is blunder)

— Post Sales Service Costs within guarantee period not considered

— Ambitious bidding without sufficient capacity (machinery, manpower, software etc.)

— New product in existing market (acceptance level unknown)

Strategic Concerns

— First deal with a new customer (pressure of initiate collaboration)

— Buyers’ market

— High cost in market penetration (red ocean deal)

— High Development Cost

— Upfront Investment

— Loss lead market entry without sufficient financial back up

Your trigger can be any one or multiple. Understanding and explaining this will lead you to a successful answer during Sales Interview.

Now move to methods and tools. Like,

— Activity based costing

— Price benchmarking

— Zero based costing

— Bottom up costing (granular method I recommend most)

— Top down costing (Will it be useful for this question? Think deep)

— Value Engineering

— Scenario analysis etc.

Explain the logic of choosing certain method (data and time availability is critical here)

Describe your findings and insights related to hidden cost drivers and opportunities of saving costs.
Next, what actions you took.

This should be closely linked with your findings. They can be (not limited to):

— Negotiate with suppliers

— Optimization in internal process

— Proposal revision, keeping it win-win

Quantify the actions and impact. How the actions saved cost or increased profitability without compromising product quality and delivery.
You should also talk about increased customer satisfaction, relation and loyalty.
Sign off with acknowledging other stakeholders’ contribution and your learnings.

Your answer must display the importance of proactive cost analysis, and turning challenges into profitable solution.

Bonus Question: How would you assess the impact of a potential raw material price increase on your product offerings and customer agreement?

Question – 02: In a highly competitive market, where your product offers distinct but intangible benefits, how would you justify a premium price compared to your competitors?

This is a straight-forward question on Value based pricing. But justifying premium price is not easy.

The success of this answer lies upon how passionate you are selling the product, how much you believe in the intangible benefit. (Better when you use the product yourself, difficult for B2B products).

Mention a compelling real life example. The question appears like a theoretical one. It is not.
Start with the overall context, i.e., competitive backdrop and the intensity of the competition.

You should mention

— Type and usability of your product

— Overall market size of the product, based on segment, value and number of customers

— Your market share

— Key features of the product

— Consumers’ expectation and Purchasing pattern

— Selling and distribution modes

— Average price of nearest 3 competitors (others are not in your league)

— What price you are offering

— What are the intangible benefits?

Declare openly that the premium price is a deliberate strategic choice. The reason is product positioning based on value addition, and not a cost adjustment.

Here you can mention Price versus Quality Matrix. India is a value-for-money (Low Price High Quality) market. Positioning something in High Price High Quality segment is challenging.

Explaining the price positioning is crucial. Your answer should not focus too much on technical features. Rather discuss how your product solves pain points of niche customers. Emphasize that the price for the solution, not for the product.
Intangible benefits can vary from product to product. Some common examples are

— User Experience

— Status Symbol (unique identity)

— Ease of use or operating

— Integration with other products of your organization (Ecosystem)

— Privacy

— Performance in long run

— Precision and accuracy

— Low or zero maintenance (or exceptionally high warranty period)

— Safety and Reliability

— Exclusivity or scarcity (limited editions)

— Individuality or personalized solution

— Psychological Boost (Adventure or sense of Freedom in general)

— Unique Craftsmanship

— Legacy, heritage, or Emotional Connection

— Aspirational value or sense of achievement

Think about the intangible benefit your product has.

Establish the unique value proposition which triggers the psychological ROI. The objective is not to create monopoly, rather gain competitive advantage by a positive differentiation.
During the discussion, it is very important to show respect to your competitors.
Present a quantitative comparison. How your product delivers superior result to meet specific needs of the same target customer base.
Connect superior value with premium pricing and customers’ willingness to pay.
You can also mention the ongoing work on your product, like further R&D, patent etc. It will show your interest to protect and solidify the long term value proposition.

Your conviction is the key.

Follow up questions will be related to

— Customer need survey,

— Managing pilot program,

— Focussed marketing effort,

— Competitors’ reaction etc.

Question – 03: You inherit a sales territory with an inconsistent historical performance. How would you develop a realistic, yet ambitious, sales forecasting for the coming year?

This is similar to the second question we discussed related to profitability. You have to acknowledge the complexity of the scenario. And show that you are not intimidated by the challenge.

Set a real-life example. Storey-telling skill is needed. Briefly describe the context how you got that territory.

Some common reasons are

— Organizational restructuring

— New Sales Strategy like expanding rural market

— Geographical and commuting challenges

— Growing territory, where a focussed Key Account Manager is needed now

— Pilot experiment with a new product line

— An opportunity to prove yourself and get a promotion

— You understand the culture of that territory (may be you speak the native language)

— You are a turnaround specialist (never blame your predecessor)

— Any other strategic consideration like long term investment etc.

Choose your reason(s) carefully. It is the foundation of rest of the answer. At end, you have to link your strategies based on the reason of getting such territory.

Speak about the inconsistent historical trends. Mention your findings related to any period of exceptional high or low performance
Go deep in the major factors of inconsistency

— Sales Employee Turnover, territory never had a stable sales team

— Sales Strategy was not aligned to the need of the consumers in that territory

— Increased competition

— Seasonal fluctuation

— Natural disaster or force majeure events

— Change in buying behaviour

— Any negative feedback or complaint not resolved properly in past

I recommend you to be judicious here. Few reasons may appear as blaming your colleagues, or your organization as a whole or customers etc.

Prepare an objective narrative and express your determination to address the inconsistency.

Discuss how you started making a strategy for realistic yet ambitious forecasting.
Talk about thorough market analysis. Some points are

— Re-analysing customer needs

— Understanding current and emerging industry trends

— Evaluating distribution model

— Identifying untapped market within the territory

— Any other potential opportunity

Move to Customer Segmentation. There can be different categorization.

— By average purchase value per customer

— Number of orders in a specific time span

— Buying behaviour (Factors can be season, activity, festival etc.)

— Profitability etc.

Mention how you segmented them in broad or niche categories for forecasting.

Consider how you analysed competitors’ strengths and weaknesses, their pricing strategies, and potential impact on your forecasting.

Methodology of forecasting you adopted. When you are dealing inconsistent performance, I would recommend a combination of ARIMA and Delphi Methods. One quantitative and one qualitative. It would also balance the realistic yet ambitious parts.

Please evaluate your industry, product, territory, and time-resource availability. Accordingly, decide your methodology. You may select one method instead of a combination.

Panel members expect you to be ambitious. Justify optimism with data and clear reasoning.

Then four important factors you have to Cover

Initiatives (Action Plan and expected impact on Sales)

Resource Allocation

Risk Assessment (If panel permits time to explain, you can opt for scenario analysis)

Periodic Performance Monitoring (Your Accountability to achieve the forecast)

Conclude with the success story. What % of forecasting you achieved. Above 70% is good for such a territory. Above 90% seem exaggerated.

This question is not only about forecasting, it is more about your character. How you set up ambitious target by calibrating the ground realities.

Question – 04: How will you cost out a completely new and innovative product with zero historical data? What factors would you consider beyond raw material and labour costs?

Over and above your expertise in product costing, this is a test of your creativity and strategic financial thinking. The strategic thinking is finally related to break-even analysis.

Start with acknowledging the complexity to cost out without any historical data. Set a real life example.
Amplify the challenges. Some common examples are

— Inconsistency in Mass Production and Final Product features

— Uncertainty of performance of new machine, if any

— Identifying the cost drivers

— Zero knowledge on cost optimization measures

— Risk of Under-pricing

— Unforeseen technical challenges

— Deciding optimal price point, for which customers will readily pay

— Risk of budget overrun and shifting of break-even

— Project Management

Evaluate your product, industry and customer to identify your challenges.

Before going to the costing, share how your scientific approach helped to reduce the risks.

— Collaboration with all internal stakeholders and brainstorming

— Keeping open communication about risks, uncertainties and invite solutions

— Collecting and analysing data of pilot program

— Hire an industry expert as a consultant (with a time deadline)

— Thorough research on related products, technologies and manufacturing processes

— Scenario Planning and developing multiple cost models for different production volumes

— Thoroughly research the supply chain

In short, gathering more data and insights.

As the question excludes labour and raw material costs, talk about the other important costs:

— Overheads (Rent, Utility, Administrative, Sales & Distribution etc.)

— Cost of R&D and customization

— Investments made on new machine, software or any other infrastructure

— Borrowing Interests, if any

— Marketing and Advertising Expenses

— Logistics

— Inventory Costs with an estimated damage

— Learning and Training costs before the product becomes mainstream

— Machine per hour cost

— Any other regulatory or intellectual property cost involved

You have to talk about how you estimated the ground-level parameters, like

— Selling unit (volume, per unit, weight etc.)

— Cycle Time to produce one sellable unit

— Rate of rejection in final QC check

— % of rework etc.

If discussion goes in detail and you have financial flair, I recommend you to discuss

— Depreciation

— Professional Fees

— License Fees (Statutory or Software)

— Insurance

— Commissions (Sales)

— Calibration and Maintenance Costs

— Taxes

— Environmental Costs (Waste disposal)

All of the above knowledge and analysis boils down to Break Even.

What will be optimal cost, how many units needs to sold within which time-frame to recover the investment. No profit.

You decide which methodology of break-even you will follow, based on your product, industry, investment, customer profile or any other parameter.

For this particular question, I would recommend Total Cost method, over Contribution Margin.

Conclude your answer with courage to accept that you strive for a perfect costing with your scientific and collaborative approach. Simultaneously you will collect more and more data on periodic basis. It will help you to decide an optimal costing in a specific time frame.

Your answer must demonstrate flexibility, continuous learning and adaptability. Ultimate objective is to create value for customer.

Question - 05: You have a limited sales budget for the next year. A crucial market opportunities arise requiring additional investment. How would you negotiate for additional resources, and justify the deviation from the initial budget?

Though there is underlying budget and forecasting, this question additionally tests three aspects:

— Data driven approach of presenting an opportunity

— Return on Investment

— Stakeholder Negotiation

Start with acknowledging organization’s financial constraint.
Then set a compelling narrative about an exciting sales opportunity. Before going into data, explain the nature and the potential opportunity. And how it is strategically aligned with long-term vision of the organization. It can be related to

— High Margin

— Entering into a new market

— Exploiting an USP of your organization or product

— Introducing a new product

— Gaining competitor’s market share

— First deal with a prestigious client, whom you are pursuing for long

— Fast ROI and cash generation

— Scope of utilizing a dead inventory etc.

Now present a data driven impact by pursuing this opportunity. It should include

— Market Research Data

— Competitor SWOT

— Potential sales forecast

— Potential revenue

— Potential profit

— Market share gain

Along with above numbers, present the intangible benefits

— Brand awareness

— Customer loyalty

— Potential of market leadership

— Long term profitability

Now the most crucial part. Whether you have assessed the risk. It can be multi-fold:

— Inaccuracy in your market research data

— Overestimation of potential in excitement

— Technological Challenges

— Internal clashes with existing order execution

— Regulatory Challenges

— Intellectual Property challenges

— Market fluctuation

— Any strategy adopted by competitors, which you are unknown

Can you quantify each risk and its impact?

Do you have a risk mitigation plan in place? It will make the opportunity realistic.

Instead of straightaway asking for additional budget, present your case with a cost-benefit analysis. Discuss additional investments for

— Infrastructure

— License and Approval

— Certification and Audit

— Machinery

— Software

— Manpower

— Training

— Marketing Budget

— Traveling etc.

Be transparent by providing a clear and realistic breakdown of the additional budget needed and how it will be allocated.

Show flexibility along with ambition. Explain how you considered

— Internal efficiency enhancement

— Phase-wise investment

— Role restructuring of certain team members etc.

The final negotiation for additional budget allocation depends upon your conviction and sales expertise.
Conclude with the success story. Mention

— Timeframes you assigned

— Resources you allocated

— Periodic monitoring

— Changes and adaptations you made during the journey

— Internal team collaboration

— Learnings in this case

Emphasize how you evaluated board members’ feedbacks and concerns, during the overall process. Panel will prefer someone, who believes in collaborative decision making.

Interview panel will evaluate your motive. Do you want to be a star performer at any cost? Or you are focussing on organization’s long term success.

Wrapping It Up

This is it for now.

In a world of increasing macro-economic volatility and evolving customer preferences, is traditional methods of costing and pricing sustainable? Are we on the verge of a new era, where data-driven sales forecasting will reign? Will dynamic pricing models be the norm?

Hiring organizations are also finding these answers. Being a senior level sales professional, mastering these answers will keep you ahead in Sales Interview. Interview or no interview, in long term business, value based pricing is and will remain the key.

Senior Sales Professionals Interview Questions. Part III – Costing Pricing Forecasting