Quite often, sales discounts are used to simply make a sale where you wouldn’t otherwise. That’s bad practice.
Not only does it set a faulty precedent in which discounts become expected, but it completely cuts your profit margin. Unless providing discounts is a specific part of your sales process, it can completely disrupt your revenue goals.
Pardot’s Senior VP of Sales, Derek Grant, shared his ideas with us. His advice is to develop specific reasons for discounts and stick with them. When a customer asks for a discount, be upfront and say something like, “Here are the four reasons we discount. Which one applies to you?”
Here they are:
1. Length of Commitment
When clients agree to a deal over an extended time period, it can validate a discount. If the average deal of your company lasts for one year and a prospect asks for a three-year contract, discounting their deal acts as a thank you for their commitment and continued support. Rather than an incentive for the deal, it strengthens your relationship with the customer.
2. Timing of Cash
There’s something to be said for paying upfront. It’s one thing to agree on something, but completely another for money to actually change hands. Instead of net 30 days for payment, if a prospect pays in 5, it may be worth your while to discount their contract.
3. Buying More Volume (or Higher Edition)
This one goes hand in hand with length of commitment. Instead of buying 100, your customer buys 10,000. They obviously trust you to provide quality, else they wouldn’t take the risk. It’s up to you to show that you appreciate that trust. Reciprocation in the form of a discount will build customer loyalty and may even drive up referrals. The same applies to customers that buy the next tier service. Because it’s more valuable to them, giving them a discount if they upgrade their service makes sense.
4. Deal Timing
This involves closing the deal quickly. Maybe a client is willing to move forward immediately. or maybe a client is asking for a special deal or unique terms. In those cases, you can respond with something like, “If we agree to those terms, we need you to authorize the deal by Friday?” This may be particularly crucial as you close out your quarter strong.
One thing that’s important to note is that these discounts are not mutually exclusive. If a customer commits to pay annually for three years of your best service at quarter’s end, providing multiple discounts or bundled deals is perfectly alright. These are your best customers and should be treated as such.
While sales discounts are often bad, there are some cases in which they’re necessary. Use the above methods to close more deals while maintaining brand and deal value.