Let’s talk about discounting. I bet you have a discount structure lying around somewhere, possibly even on the wall near your desk or your cube. It tells you exactly when you can discount, and by how much. Ignore it for a second, and let me tell you when you should discount: Never.
That’s right. Never. If you can help it, of course. And of course, this is my opinion. Sometimes discounts are necessary, but in most cases I think they’re not. I know many salespeople who dispense them liberally, and this may not be wrong, given their circumstances, but the top performers never do. They avoid discounting as much as possible. Here’s why.
The obvious part: your bottom line – your commission – is dependent on how much you sell. Sell more, make more money. Discount more, and you have to work more to reach your goal. But this is the obvious part. (It should still be important to you; after all, it’s your money!)
The part that’s less obvious is that by giving discounts when they’re not needed, you’re making it less likely the product will sell in the long-term. If word gets around that discounts are par for the course, the perceived value of the product drops, and your prospects will look at the competition since they seem more serious.
Discounting should be used as little as possible, only when the situation demands it, and only as a tool to achieve very specific goals. The two chief ones, in order of priority, are:
- You must have a deal closed by a specific time, and discounts have been allowed as a tool to do this.
- Your deal will not close unless a discount is applied, and all other avenues have been exhausted.
And point 2 only sometimes. People often want what they can’t afford, and your product possibly ranks among those things.
When deals need to be closed by a specific time, and discounts are allowed, there is usually a good, company-level reason for doing this. Usually it means that closing the pipe, even with a little loss, is preferable to closing it later at full price. In this case, I’d say discounts should be used, though always with discretion (remember your bottom line!).
The second case is one that every salesperson has faced at least once: a customer insists on a discount or they won’t close. I’ve faced this situation numerous times, and, more often than not, it’s either a stalling tactic or an attempt to scare you into giving them a discount.
You can usually tell it’s a stalling tactic if your prospect is mentioning time-bound words like “this month” or they’re “scraping the budget together.” This usually indicates a hitch somewhere in their decision-making process, and it behooves you to find out what that is. If you can apply pressure with another contact in the company, you should be able to make a difference here. I would say a stalling tactic doesn’t require a discount.
It’s a little harder to find out if they’re trying to scare you into giving them a discount. Rather than rebuffing them directly with a “no discounts” line, I’ve found that stalling them works well. Yes, it’s possible for you to get a discount, but it may take some time. Depending on their timeframe and their internal needs, this is time they may not have. Push the purchase out a little (though not an exhorbitant amount of time), and see what happens. I’ve had clients call me and tell me, with a smile in their voice, that they want to purchase right then, and that they’d only been trying to get a discount.
If you must give a discount, have discussed it with at least one colleague and your boss, and are convinced it’s the right thing to do, then make sure it’s appropriate to their needs. This, of all times, is when you shouldn’t be stingy. Especially if you can lock them into some kind of long-term agreement. Make sure that they know you’re doing them a favor and putting in work to get it done, but also make sure it’s at a level that’s useful to them. Your clients will be happy, and you’ll be the person they call the next time.
Discounts are, in my mind, a tool of absolute last resort. I hope I’ve made that clear here, and given you something to work with.
I hope this was useful to you, and, as ever, I wish you all the best!
Do you agree with what I wrote here? Disagree? Did I miss something? Could I have done something better? Please let me know in the comments!
Image courtesy of pixabay at pixabay.com