Seven Reasons to Avoid Discounting

Seven Reasons to Avoid Discounting

In cloud, SaaS and sales in general, discounting is common practice to help get deals closed. While discounting can increase performance, it can also have negative consequences. The negative consequences include:

  • Confidence – When you offer a discount, you are saying, “I do not fully believe in the value proposition that I have been positioning to you.” Customers can feel when you “need” a deal and it often scares them away.
  • Performance – When you offer a discount, you put pressure on the company and yourself to sell more. If your discounting average is 20% every month, you have to add that 20% onto your quota to hit plan.
  • Precedence – When you offer a discount, there is no going back. You not only impact the current sale, but future sales as the customer will always expect a discount. It is also hard to raise prices on existing customers.
  • Price – When you offer a discount, the customer’s mindset shifts to price versus value. Customers should believe they are making an “investment” in your product because of the expected return, not price paid.
  • Profit – When you offer a discount, you decrease the amount of cash the business will ultimately receive. Cash is the lifeblood of business. Cash enables growth and investment. Lack of cash causes contraction.
  • Trust – If you communicate that you do not discount or do not discount past a certain point, but later offer one to avoid losing a sale, the customer will believe you are untrustworthy. What else have you held back?
  • Value – When you offer a discount, you decrease the value of your product or service. Customers make decisions based on more than price – e.g., brand, expertise, etc. Price is just one component of the buying decision.

The best way to avoid discounting is have a large, healthy pipeline. The more qualified opportunities that you are working, the less pressure you will feel and more resistance you will have toward discounting to close deals.

All contents copyright © 2016, Josh Lowry. All rights reserved.

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