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If you’ve worked in sales, you’ve heard it a million times: “Can you give me a discount?”
Everybody wants a deal.
And in a competitive marketplace, you’re probably tempted to give them one. If you don’t, what’s to keep your prospect from going to a competitor? A small discount could save the entire sale.
But trust me when I say that’s no way to deal with discount requests. You might think that it’s only going to happen a few times, but giving discounts works its way into the fabric of your company and does serious damage.
Customers are always going to ask for discounts. So what do you tell them instead of capitulating?
Let’s take a look at why you can’t just say “yes,” and then get into the right way to answer this question.
Stop Competing On Price—You Won’t Win
You can’t win by being cheap. We’ve seen this over and over in the SaaS world, but it applies elsewhere, too. There’s always someone willing to be cheaper. In many cases, you’ll be competing with a solution that’s free.
Customers are savvy. They’re not looking for the cheapest option. They’re looking for the option that provides the most value.
That’s where you have to position yourself. Not as the price leader, but as the value leader.
Now listen—this is important.
If you’ve already started creating a discount culture, it’s not too late to fix it. But if you haven’t started selling or you’re early in the game, start with an emphasis on value immediately.
Because once you start competing on price, it’s hard to change. You might eventually put yourself in the extremely difficult position of having to raise your prices. And surviving that isn’t easy.
It’s one thing to raise your prices to deal with inflation and rising costs. It’s another to completely reposition your company as a value leader.
Competing On Price Creates A Weak Brand
Your salespeople are the public face of your brand. And if they’re negotiating discounts with prospects, they look weak.
They’re no longer selling people on the value of your product or service. Instead, they’re offering 10%, 15%, even 20% off to convince people to use it. That’s not a sign of a confident, valuable company. That’s the sign of a company that doesn’t believe in what it’s offering.
That’s not what you want the world to see.
You might think this isn’t a big deal, and that your sales team only offers a discount here and there to save a sale. But trust me when I say that it will become a regular occurrence. I’ve seen it happen.
Salespeople start to offer discounts without being asked. It becomes their go-to strategy for making a sale. And suddenly, one of your most important brand voices has become very weak.
Prospects see that you’re trying to be cheap, instead of providing a great value.
It seems benign in the beginning, but can spiral out of control quickly. And as I mentioned before, it’s hard to rein it in once it’s started.
Offering Discounts Comes Back To Bite You
As if creating a weak brand in a race to the bottom isn’t enough, haphazardly giving out discounts creates other difficulties for you, too.
For example, it leads to the inevitable “I heard another company is only paying $X every month! Why are you charging me more?!” conversation. If you haven’t had that conversation yet, you will. And trust me—it sucks.
There’s always a loser in that conversation. It’s either you or the customer. Neither outcome is good.
You might not think that your customers will talk to each other, but they will.
Letting your salespeople give discounts also makes it difficult to figure out what a customer is actually worth to your company. This is especially true in subscription-based services.
If no one is paying full price, and instead paying 10% off, 12% off, 15% off, receiving two free licenses, got a free upgrade, or gets free technical support, how can you keep track of what the average customer is paying?
It’s nearly impossible.
And that comes with a host of other difficulties. Predicting revenue is difficult when every customer is paying a different amount and there’s no telling what the next customer will pay.
That difficulty in prediction means it’s hard to scale your efforts and your team. And that makes running your business harder.
The Right Way to Handle Discount Requests
Having read all this, you probably expect me to tell you never to give another discount again. But that’s not what I’m here to tell you.
Instead, I encourage a systematic approach. Set down some rules for your salespeople, enforce those rules, and monitor the effect that giving discounts has on your sales and recurring revenue.
Don’t Default To Giving Discounts
This is crucial. Your salespeople shouldn’t offer discounts on every call. Set this expectation clearly. Use your CRM and sales software to keep an eye on how often salespeople are giving discounts.
But also let salespeople know that they can give discounts at the right time. You’ll have to decide in which situations they should offer discounts.
Is it when they think they’re about to lose a sale? When a customer says that a competitor has offered them a discount? When the prospect shows hesitation? A clear set of expectations helps everyone stick to your discount strategy.
Always Get Something In Return
This is a tough one to get used to. Especially if offering discounts has been an act of desperation in the past. If the prospect is seconds from walking away, it’s hard to ask for something.
But it will completely revolutionize your sales process.
In the SaaS world, there are four things that we often ask for in return:
- Case studies
Let’s break those down a bit.
You see this all the time in the SaaS world. We offer a 10% discount to our customers if they pay for a year in advance. And so do many other software companies.
Depending on your sales model, you might ask for a different type or length of prepayment. But it’s often worth it, because you get predictable cashflow—and that’s worth a lot.
Convincing customers to take several hours to help you create a case study isn’t always easy. But offering a discount on your product or service is a big motivator.
You get effective marketing materials out of the deal, and your customer saves some money. It’s a great exchange.
It’s possible to exchange a very small discount for a testimonial, but I’d recommend holding out for a case study. Many customers will give you a testimonial for free. Fewer will go through the effort of helping you create a case study.
Word-of-mouth marketing and referrals are the holy grail of marketing. And offering a discount in exchange for that marketing is a great trade. Many companies use referral codes that give both the referred lead and the referrer a small discount if it results in a sale.
You might choose to offer a discount in exchange for a connection to a lead or hold out for a sale. It’s up to you.
If you’re interested in getting reviews on specific platforms or websites, that can be cause for giving a discount, too. But be cautious with this—a one- or two-sentence review isn’t worth much. You’ll want to be specific about what you’re expecting in exchange for the discount.
Standardize Your Discount Offerings
Your salespeople can’t offer whatever discount they want. That’s a recipe for all the problems I mentioned above. Instead, put a system in place that they can follow.
For example, you might offer a 10% discount in exchange for paying annually, a 15% discount on the first year or purchase for a case study, and one free license per review on a specific list of platforms.
Or your system could be totally different than that. Whatever the case, make sure that you have a clear system of discounts and what you get in return. And don’t let your salespeople deviate from this system.
Stick To Your Guns
Many customers always ask for discounts as a negotiation tactic. That’s just what they do. And when you tell them “no,” they’ll get mad. They’ll say all sorts of things in an effort to get a discount.
But you know what? In my experience, about half of them will buy from you anyway, whether you give them a discount or not.
For the sake of your brand, stick to your guns. You need to be willing to say “no” and walk away from the sale.
I know it’s hard. Every sale matters, and walking away from one just feels wrong. But it’s absolutely crucial that you’re willing to. We’ve said “no” to thousands of businesses at Close, and it has helped us build a strong brand that offers a huge amount of value.
Don’t back down when people ask you for discounts.
. . . With One Exception
There’s one exception to everything I just said: selling to enterprise clients. You just have to give discounts to enterprises. That’s how it works.
They have entire procurement departments whose job it is to get discounts. And they absolutely will not buy if you don’t give them a good deal. They have a great deal of purchasing power and they know it.
If you’re selling to enterprise clients, this is just a fact of life.
Turn Discounts To Your Advantage—And Crush Discount Culture
Discount culture kills companies. But that doesn’t mean you can’t give discounts. You just have to be particular about how you do it. If you develop a system for reasonable discounts and learn to say “no,” you’ll succeed.
So there you have it: a simple, reliable way to deal with discount requests. Don’t default to giving discounts, always get something in return, and standardize your discount offerings.
How do you give discounts at your company? Do you have a system, or do you let salespeople wing it? Leave a comment and let us know.
March 13, 2019 at 09:01AM
Forbes – Entrepreneurs