There’s no escaping the prying grip of a smart buyer — unless you want to lose a deal. Just like you, the buyer is trying to get the best deal they can get. Going into the deal with a mutually beneficial outcome is the only way to go.
In order to effectively wade through sales discount discussions and negotiate like a pro, know that, to have a mutually beneficial outcome is to understand why a discount is needed. It lays a framework for how to field questions, objections, and the path forward.
Below are a few discount reasons I often run into:
- They’re fishing – The decision has been made, but in the final hour they’re looking to squeeze a nice prize out of you.
- True budget constraints exist – When working lower in the org chart, it may be true that there is a set budget for a project. But keep in mind, making a business case for more is not uncommon in forward thinking organizations.
- Value misaligned – Too often, reps haven’t fully painted a future without your product, which leads to the value being misunderstood.
- The prospect is shy of a longer term length – They want a discount to offset.
- The prospect is concerned about timing of payments.
- Software eaters– For folks that buy a lot of software, it’s become the norm to discount 20+% and set prices accordingly. Thought it’s a shame, it’s reality.
- Existing Technology stack – Incumbent technology is less expensive, or competitors in the deal are offering lower prices.
In any situation, once you’ve understood the underlying motivations, you’re ready to answer the question, which comes in many forms:
- Do you have any wiggle room on price?
- What kind of discount can you provide?
- What is your best price?
- What can we do to get creative here?
Before jumping into a response, I always like to coach an additional question: “Can I ask what’s driving that question?” If you hadn’t already figured it out, it will give some clues to your puzzle above.
But just because the puzzle is showing signs of life, doesn’t give reps the microphone to start blabbering nervous nonsense. At Lesson.ly, we drive transparency through our culture, and believe that the pricing we’ve set forward to prospects will absolutely be returned in time saved, productivity gained, and process improved.
In certain cases discounts will be mutually beneficial to all parties. Here’s how:
First, you must know your levers and make them very clear to the prospect. A discount costs your company something and before you go straight the 20% off, ask your reps how you’ll rebalance the scales. The levers we pick and choose from are:
- Volume or Spend: How many widgets/units or what package type is the prospect purchasing? A common scenario we might see: “Wayne, I know we’ve talked about our basic and plus packages. If we work with you on a discount, would you be willing to start in the plus package?”
- Term: Longer terms mean more predictable revenue for your company and are certainly worth something! “If we work with you on a discount, would you be willing to consider a 24 month initial term, Wayne?”
- Timing: This is when the final deal will be done. “Wayne, if we work with you on a discount, when can you commit to getting legal work done?”
- Payment Terms:: If your standard is annual n30, this may not be as relevant. But for clients willing to pay upfront, cash flow is worth something!
Ideally, the prospect will work with you to pull two or three levers, and you can make the case internally for a discount.
I always try to coach reps on getting creative before getting negative, though. Keep in mind, there’s more than one type of discount. For example:
- First month at no cost with a contract in place
- First two months discounted
- Premium Services Included
- Additional Value Drivers Included (think features and functionality)
- ___% discount on first year
This list is by no means exhaustive, but you’ll notice that all of these affect ARR/MRR as little as possible. Keep them simple, but make sure that reps have the autonomy and enablement to pull the right tool from the toolbox.
Discounts won’t kill your revenue as long as you have strategic discount options in place. Don’t let your reps jump to the discount in desperation or decline a deal without coming to a negotiation through conversation.