Are Discounts Hurting your Sales?

Discount in sales, where to begin? As salespeople, we all want to close that deal and make that transaction, even if it means resorting to giving discounts to our potential customers. It’s a practice that I’ve widely witnessed over the course of my sales career. 

Many salespeople believe that they must offer a discount in sales to win a client. This mindset of thinking that offering a 10% discount is not a big deal. If they don’t offer a good price, the customer will go to their competitor, they reckon. But in reality, this isn’t necessarily true.

The practice of offering a discount in sales leads to a lot of different issues. It not only devalues your brand but also breeds a poor sales culture.

Before I get to the details, here’s one principle that I always abide by: Every deal must be profitable or strategic.

No exceptions.

Discounting really hurts your bottomline

Offering a 10% or 20% discount in sales means lower MRR (monthly recurring revenue), which equates to a lower average revenue per user (ARPU). Meaning, you have to now acquire more clients than before in order to make up for the deficit that was caused by the discount. If the discount culture continues to repeat, you’re stuck in that vicious cycle of always catching up. 

But that’s not it. It’s not only hurting you at the start of the relationship with a client. Imagine, the same client now wants to upgrade to a higher plan or wants to add more users to their account. Do you think they will pay the full price for the new users or for the higher plan? I think not. They will expect a discount from you, simply because they got one in the first place. 

To retain their business, you will go ahead and give them one. If you refuse the give the discount, that negative is what they will remember you by.

Devalues your brand

Quality and price do not exist as isolated concepts in customers minds. They are tangled together. Research has shown massive discounts can cause the consumer to believe that something is wrong with the product.

I once worked with a salesperson that used to play the discount card at the end of every month to hit their quota. That person would offer a huge discount (20%-30%), provided the customer makes the decision by the end of the business, the next day.

It worked a few times but most of the time it did not. Later on, we received feedback from some of the prospects that this selling practice made them uncomfortable. It was a shoddy practice and reflected very poorly on our brand. 

These kinds of discounting practices just don’t work. Period. You should always try to sell your product on the value it offers and can provide a customer. You should show why your product is worth the price. 

If a prospect took the time to speak to you, had a demo, and trialed your product, it means they are interested in your product and are considering making a purchase. There’s no reason to discount things people want.

You may actually have the best product on the market, but by offering it at a discount, you are not only discounting it, but also devaluing it. 

Stick to showing value to your prospects and how your product can help them. By doing that, you’re making the prospect purchase your brand on the value they get out it and not because you’re the cheapest solution on the market.

Just remember:

The Bitterness of Poor Quality Remains Long After the Sweetness of Low Price is Forgotten

It sets a bad precedent for your sales team

Salespeople will do almost anything to make sure that a deal gets closed. They will jump at the first sign of trouble and offer discounts to the prospect just so they can make that sale. That breeds a very poor culture in the sales team and sets a bad precedent.

Rather than showing the value of the product, salespeople will look for the easiest available tool, and that’s offering a discount. And almost always, discount in sales are abused by salespeople, as they offer it to everyone, even the ones who don’t need it. 

Once you start offering discount in sales, it becomes increasingly difficult to stop. And while a discount may seem like that’s your only option, it’s not. You don’t want to set the precedent that every time your customer buys from you, it’s at a discounted price. That’s just bad for your business.

You’ll reveal a lack of confidence in your product

Price perhaps is the weakest of all attributes in SaaS when trying to sell your products. Reason why? because any company or competitor of yours can meet or beat the price you offer either for the time being or long-term.

If your sales team resorts to offering discount in sales to potential customers, who most probably are looking at other vendors in the market, perhaps your competitors. It sends a signal to your customers that your product has no better attribute to distinguish itself from the competitors in the market. 

It shows a complete lack of confidence in your product and you’re silently proclaiming, what you’re selling is worse than, or at best equivalent to, the product of your competitors – and customers are smart enough to know it.

Relationships are built on the confidence your customers feel in your products, and the assurance they get from buying what they know to be quality. Discounts wipe out these two brand essentials and leave your business in a very risky position in both customers’ minds and the marketplace.

Does this mean you should not give discounts in sales at all? No. But (and it’s a big but) be strategic about it. Make sure you get something out of it.

Handing out discounts left and right is a sure shot way to destroy credibility and the value of your brand. It also does not mean you shouldn’t give any discounts, you can, but you have to do it right. 

Get something in return from the customer

Be that be a case study, a video testimonial or a referral. Make sure that you get something out of the customer. You scratch my back, I scratch yours. 

Something that I use to do in a previous company I worked for and it worked well for me was, if somebody wants that discount and price is a blocker for them. I would (rarely) offer them a discount, on one condition, and that is if they commit and pay for the year up-front. It’s guaranteed income and your CS team can rest in peace that the customer won’t be churning anytime soon.

Referrals are immensely underrated, and they work (a lot). Make sure you get the customer to commit to giving you referrals to folks that could also benefit from the product you’re offering. 

Video testimonials along with case-studies are also a great way to build credibility amongst potential customers. These are sales-focused assets that your sales team can use to convince other potential buyers.

Instead of giving a discount, increase the value

Very seldom does it happen that a prospect is not purchasing due to the price. They usually are looking for a good deal and what you need to offer them are deal sweeteners and not an outright discount. Good way to add value is to throw in something you’ve got lots of and it doesn’t cost you much e.g. a feature from a higher tier plan. You get to keep the original price and give them something that you have an abundance of.

Don’t toss in anything that costs you a lot to deliver. Make sure that your customer knows the full value of what you’re adding to sweeten the deal so that they understand the value they’re getting.

Remember: Every sales pro should have some deal sweeteners in his or her pocket (should the need be). But it’s the ones who are strategic about it that actually come out on top.

Your focus as a salesperson is to do one thing — demonstrate value. You do that by listening to the customer. Let them tell you what they’re looking for, and if they start asking you for a discount, then shift your process from thinking how you can offer a discount to how can you show them more value.

Just because the customer asks you for a discount doesn’t mean they should get it. Engage the customer in their needs and what their expectations are.
Your objective is simple — close the sale at full-price.

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