Seven Reasons to Avoid Discounting


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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; the customer will always expect a discount. It is also hard to raise prices on legacy 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.


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