“Hello! I just wanted to update you that our tool has helped your team accomplish the revenue goals, I hope you are satisfied with the tools trial,” sales representative asked.
“Yes, my team informed me, it’s very impressive,” the prospect replied.
“Am really glad to hear that,” the rep replied. “Well, it will not cost more than Rs. 4799 for a year. If you are willing to opt for the yearly subscription of the software then I can give you 30% discount,” the rep added.
If you are the boss, or a quality manager, I am sure after reading above conversation you will fire the rep, on the spot. Keeping the sarcasm aside, I would like to add that this was a drastic error made by the representative. There was no need to jump the gun and mention the discount, especially when the prospect didn’t even ask for it. If the rep had avoided it, the prospect would have happily paid the full price.
I am not blaming the salesperson, because I know that it’s a challenge to decide when discounts should be mentioned. If you mention them too soon, you’ll lose some brownie points from your paycheck, and if you forget to mention it, well then you can say goodbye to the deal. Speaking in a more general manner, there are numerous situations where giving discounts are helpful and then there are situations where you must avoid them altogether. So what are those situations?
Scenarios where discount should be offered
- For extending the contract length
When representatives give discounts to buyers for extending contract of lease based or subscription based products & services.
- For having a better payment term
Is the buyer willing to agree for more favorable payment term? Customers mostly pay in monthly installments, but if the prospect is purchasing on quarterly terms, it’s a good idea to give a discount.
- For increasing the volume
Volume based discount is a favorable option for the representative if the deal is larger than your average sale price.
- Give a personal touch to the buyer
Providing discounts to make sale of a more comprehensive product also work in your favor if you think that the current product or service selected by the buyer will not suffice their need.
- Short-term Price Issue
Short-term price issues make payment impossible for the prospect. In such cases, discounting is a better option. Make sure it’s quid pro quo if you slash price without asking for something in return, the buyer may agree to sign the contract that day or week in exchange for a discount.
Scenarios where Discounts should be avoided
- When you got competition
Let me tell you, never commoditize your product/service. And don’t give discount just because of winning the price war with your competition as it will send out a negative message that price is the only differentiator between your product/service and theirs.Pricing wars have no winners, only losers. Even buyers don’t benefit. Rather than choosing a solution based on the value, they’re opting for the least expensive one.Let’s take a scenario where you are having a conversation with your prospect —The prospect says,”Why should I even think of buying from you when X competitor sells the same thing for Y percent less?”“Sir, can I ask you if your product/service is cheapest in the market?” This question should be asked to remind the prospect that high quality services/products are never dirt cheap. You don’t want to be rude to the buyer but should be able to deliver the message clearly.
“Sir, with all due respect, cost has always been a key factor when it comes to decision-making, let’s talk about ROI then. It all depends on what you want to accomplish with this purchase.” This type of question will help refocus the conversation on your prospect’s desired outcome, show them how your product is unique and how it will help them achieve their desired outcome.
“That’s absolutely correct sir. I am impressed with your observation, but I would like to let you know that we have deliberately priced it that way. If you don’t mind may I ask if our competitor offers everything that you are looking for?”
Don’t let the buyer think that you are getting insecure. I am not asking you to criticize the competitor’s product and it’s pricing. Trust me that never helps. But don’t stop yourself from taking a dig on the prospect’s misconceptions. (P.S. You know that cheaper is not sufficient, and your prospect has that blind faith on a cheaper, insufficient product, please don’t hesitate to clear it out for them, they like thorough and meaningful explanations, and if you don’t do that then, in my opinion, you are a criminal)
- When you must satisfy an Empty Request
Prospects are looking for discounts, and they know that the representatives are on a thick schedule for completing their target. Don’t hand out discount to the buyer, just because you want to achieve the target.The end of the quarter is the timeline which is dreaded by every salesperson and prospects know that you have need of closing more deals to achieve your quota. Offering a 10% discount to your prospect for closure might seem like a legitimate move but, you’re forcing your prospect onto your timeline rather than respecting theirs.
I would like to share that prospects never appreciate if they feel that they are pressured into a deal, never rush them into signing a proposal. I am hopeful that with these guidelines, you can use discounts in a more productive way to develop mutually beneficial deals.