When was the last time you gave in and gave a customer a discount?
As a salesperson, chances are that you’re often faced with the decision of whether or not to offer a discount and get that sale. You do, after all, need the business in order to grow.
But the truth is that while giving a discount might help to close the deal, that one single act changes your relationship with the client in question, and affects your business on the whole.
The obvious impact is, of course, that your revenues take a hit every time you give a discount. But let’s take a look at all the other painful side effects of discounting your products or services:
1. It devalues your business, product or service
Giving discounts shows that you lack the confidence to hold your ground when it comes to price. It shows that you are ok with selling at a lower price than you were asking for, which devalues your product or service. If you are sure of the value that your business, product or service brings to the table, there should be no reason why a price reduction is justified.
2. It becomes an expectation
Giving discounts is a vicious cycle. Once you give a customer a discount, they’ll expect it again, and you can’t raise prices once you’re ‘established’, even if that was what you had planned to do. Depending on the industry that you operate in, word could also get around that you give certain customers discounts, and the expectation carries forward.
3. It puts you in the ‘price game’
The second you give in and give a discount, you’re playing the ‘price game’. You’ve made price the factor that someone buys from you, which devalues your product or service’s true quality and benefit. It also means that your customers are likely to go with a cheaper option when they find one.
But customers ask for discounts – they’re always going to try and get the best deal possible. And of course, you want the business too, so you can’t just say ‘No’ and walk away from every deal.
So here’s what you do instead of offering a discount:
- Remind the customer about their problem or the opportunity that you are bringing to them. It is either a problem that impacts profitability, or an opportunity that increases profitability. Bring that discussion to light again.
- Let them see the building blocks of your USP – if you’re at the price discussion point, then you’ve convinced the customer that you have something valuable to offer. Remind them of that value again.
- Give additional value instead of discounting – for instance, add something into your package, or give them an extra unit within the same price. It is better (and often more cost-effective) for you to add a little something, than to cut price down.
Lastly, prepare before hand for the negotiation discussion. Negotiation catches some of the best salespeople off-guard. Before you get to that point, make a list of a list of all the things that you want from the customer, and what they could want from you. Play the ‘give some, get some’ card.
So if all else fails, and a discount is the only way forward, be sure to get something in return like better payment terms, or a long-term contract.
How do you handle discount requests? Do you give in and end up giving a discount, or use one of the methods we’ve outlined above? If you’ve got a more creative approach, then we’d love to know!
About the Author
Ramez Helou is the founder and CEO of The Academy for Sales Excellence. You can reach him via email at firstname.lastname@example.org