Discount, Smishcount
I almost hate, but definitely do not like discounting the price of our offering. However, there are times when you or the company you work for, feel like throwing out a reduced price to a prospect may get the deal done, especially if it’s the end of the month, quarter or year. Maybe you have a prospect that’s just not moving and you think that offering a discount will get them over the fence. Hopefully you actually know if price is really the issue and you’re not just grasping at straws to get the deal done. Assuming you’ve done your homework and you have a good relationship, making a concession on price can work if it’s done the right way.
Loss of Profit Margin For The Win
If it’s not obvious, when you offer discounts or make price concessions to win a deal, you’re simply giving up profit margin to get the deal done. I’m not saying that’s a bad thing, but just be aware of it. Which is more important to you and your company? Winning the deal or taking a hit on profit margin?
The lower your margins are when you priced the deal, the tougher this decision can get. I’ve seen organizations bring on a deal to break even and even at a loss, just so they could win the client in hopes that more work or upselling and cross selling could get more profit out of the deal in the long run. I don’t recommend that approach at all since it’s just too risky a proposition. And more times than not, depending on the client and your offering, you might experience service level creep that eats into any margin you built into the deal in the first place. You know what I’m talking about. Clients that need a little more hand holding, a little more work than the norm, they can definitely eat into your margins, so be careful.
Rinse and Repeat
Offering a discount often turns into a vicious cycle. Whether you offer them at the end of the month or end of the quarter, you’ll find that you’re training your clients and prospects to hold off on signing each time, waiting for a discount to be offered.
If you’re in this cycle, find a way to stop it so that you’re only offering discounts to those prospects that are highly likely to move and sign the deal in the timing you need to get it done.
You can do this by simply asking your prospects, “If I could do something on price, would that help make the decision (to sign, get started, etc) any easier?”
Doing it this way lets the client know that the discount is conditional to them taking action to sign and getting the deal done. Make that clear in your offer, but don’t just email or call and offer all of your pending opportunities the same discount. That’s a rookie move and one you should avoid.
By asking if there’s something you can do on price to get the deal done, if they say yes, you should follow up by asking for a specific number. Maybe they’re thinking of something absurd or maybe they’re thinking of something less than what you’d typically offer. Either way, once you have the number, you can simply ask, “And if I can get to that price, can we get the deal done before the end of the month/quarter?”
It’s a winning strategy and assuming you’ve built a good relationship with the prospect, shouldn’t be a difficult conversation to have.
Concessions Other Than Price
Making a price concession is one thing, but you’ll also find that there are other things outside of price that are important to your prospects. These opportunities can help you preserve margin and still get the deal done your timing.
Think about your offering and what might make sense. More importantly, ask your prospects.
Maybe they need flexibility around payment terms. Perhaps they need help implementing but don’t have the manpower until they bring on a new hire or three. Every organization and deal can be different, but be on the lookout for these opportunities versus just assuming it’s a price thing. Determining where else you can provide value, outside of pricing, can oftentimes mean more to prospects than a simple discount and can separate you from the competition.
Putting It Into Action
Know your prospect and what’s important to them. This cannot be overstated. I’ve asked my salespeople, “Without looking or telling me, how much cash do you have in your wallet/bank account?” They may take a second, but they all know the answer and once they have it in their head, I say, “Just like how well you know that number, that’s how well you should know your client/prospect.”
Don’t just offer a blanket discount to everyone in your pipe. It may get you some deals to move, but it will just train your customers to wait for that moment each month/quarter.
Go deeper and ask, “If I could do something on price, would that help make the decision to sign any easier?”
If they answer “Yes/Maybe”, ask them “What did you have in mind?” (Your prospect may say yes and ask you what you had in mind. In that case, I would suggest saying, “that’s exactly what I was going to ask you. We’d like to see what we can do to get this wrapped up before the end of the month/quarter, so what do you have in mind to get us there?”
If they answer, “No/Not Sure/It’s not about price”, ask them “What else could we do to help get this wrapped up before the end of the month/quarter?”
Be creative and work with the prospect when it comes to concessions other than price, but there may not always be something that gets them to move. So be patient and don’t turn into a used car salesman.
Stay focused on the needs of your prospect/client and know what’s important to them and what will/could be of most value to them so they’re happy with the decision to sign on your timeline and get it done.
Now go sell somethin!
