Sales Coach: Discounting Like a Moron
Sorry — I don’t think I’m interested.- OK, but what about this awesome reporting feature and how it will help you…
- No thanks, I’m going to pass.
- What if I gave you a 25% discount on the first 3 months?
- Uhhh…no. (click)
My boss literally said “What the f…” but stopped short before he completed the thought. I was 22 years old and I just learned a lesson in how sales discounts work.
Discounting is inevitable in most B2B sales scenarios, so you should plan on it and learn to do it correctly. Since I’ve already illustrated how NOT to discount, here are some rules to keep in mind the next time you need to cut a deal.
1. Discount with purpose.
In my nightmare scenario, I threw out a discount at a weird time hoping it would stick. This destroyed my credibility, annoyed the prospect, and made me look like an idiot. A discount is a tool and you should only use it when the job requires it.
2. Never give without getting first.
You should never offer an open-ended discount — you’re giving the prospect a deal and you need to get something in return. I teach my reps to make discounts double-conditional:
If you can confirm with your manager that a 25% discount will get the agreement signed by the end of the week, I’ll go to bat for you with my manager. She OK’d a 25% discount for another prospect last week, so I’m pretty sure she’ll say yes.
While it is a teensy bit manipulative, this approach improves the likelihood that your discount creates the desired action from the prospect and it aligns your interest with the prospect’s.
3. Discount time instead of cash.
I’d rather tack on a month or two to an agreement instead discounting the cash paid. Time-based discounts have the same impact on effective price and revenue, but won’t negatively impact cash flow.
For example, instead of a 25% discount on the monthly price, offer 8 months for the price of 6 months — paid up front, which economically a 25% discount. I’m giving and getting here — the prospect can have a discount, but on terms that are slightly favorable for me.
4. Have a gameplan.
Work with your team to specify discount terms of engagement. Reps should be able to offer up to XX% without involving their manager and they should have clear guidelines on what to get in return from the prospect.
You’re gonna have to discount. Prepare for it and do it right.