Discount is a Four-Letter Word
A shift in your mindset and a willingness to ask better questions can win you more business at higher margins.
Recently, I wrote a post on LinkedIn about discounting. Essentially, my message was: if you need to resort to discounting, you're failing as a salesperson. When you lower your price, you’ve failed to create enough value to justify the original quote. It ruffled a few feathers, which I don't mind, but I was a little surprised at the nerve it seemed to touch.
A lot of people called foul and defended the practice as good business and customer service. Many others applauded my sentiments and understood exactly what I was trying to say. While I don't like to use hyperbole as a means of getting attention, I know this is a sore spot for a lot of people. Let's dig into it a little more here...
Before I get started, let me first address a fair point about pricing models that are intentionally set high just so that they can be lowered. I know there are industries out there where list price is not even a consideration. This is a pricing model issue, not a discount issue. Don't confuse the two. Even in that discussion, there is still a target price that those sales teams are trying to reach. Consider that for this discussion.
The biggest reason so many salespeople discount is because price is the first (and easiest), objection our prospects raise. When I interviewed Lee Salz he noted that you can expect a 20% discount on any home improvement project by simply having a look of shock and horror on your face when you get the bid. The price often comes down immediately, without anything further discussion.
It doesn't take much to move past that objection though, and that's why I call discounting a failure. Sure, you may still get the business. Yes, generating revenue is the goal of the seller. So, no, it is not a total failure. However, I hate to see salespeople leave revenue on the table because they didn't have the belief or the skill set (in that order) to make that sale at their target price.
Start here: do you believe that your solution is worth what you're asking people to pay for it? If not, then we can stop here. There's no sense in asking anybody to pay more than you would if you were in a similar situation. Your customers can smell that lack of belief from a mile away. Not only does that increase your willingness to discount, it almost makes it necessary.
This is where the slope gets really slippery. Take a cue from the prophet Ice Cube, and check yourself, lest you wreck yourself.
Not only are you enabling price erosion, you’re eroding your own belief that you can command top dollar in the future for a solution that you (allegedly) believe is the best thing out there. You’re unwittingly training your customers to expect decreases and reductions, even as newer, more sophisticated, more expensive solutions are brought to market.
In order to sustain revenue growth every year, you’ll have to sell way more of your solution if you’re doing so at a lower price. So pick your poison. Do you want to sell better, or just sell more?
This is where skill set comes in. The portion of the sales process that most reps overlook is discovery. When you do this, you ignore your best opportunity to establish value. Top performers spend a lot more time here, and that allows them to dig deep to uncover the gap between their prospects’ current situation and their desired future state. Instead of jumping right into where you get to talk, ask questions that demonstrate to your prospect that you’re someone who brings real insight to the relationship. There’s more to a business relationship with you than the transaction. There’s support, guidance, a partnership opportunity…
Those are things that are worth paying more for, but the faster you move in to present and close, the more apt your prospect is to ask for a lower price. Your lack of discovery skills is setting you up to discount long before a price is even quoted.
So what about your belief in your product and your ability to ask better questions is outside of your control? Those are the two biggest factors in avoiding discounts. You can have direct impact on their improvement. That is precisely why I consider discounting to be a failure.
I think if more salespeople started thinking about discounting this way, they’d take a lot more responsibility for their success. Not only would that mean higher prices and margins for companies, but also more fulfilling relationships and experiences on the customer’s end of the deal. I like situations where everybody wins, and I think you do too.
Jeff Bajorek
Real. Authentic. Experience.
There’s a big difference between knowing how to sell and being able to. Jeff Bajorek spent over a decade in the field as a top performer. He’s been in your shoes. He knows what it will take. He can help you succeed.
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