How to deal with discount requests in a sales negotiation
Giving a discount on a sale might sound like an obvious thing to have to offer a prospect. Surely you’ll win the sale if you go for a discount? The reality, it turns out, is much more finely balanced and as a sales person you should not always jump to giving discounts. Let’s find out why.
As a salesperson who wants to meet your target for the month, you want to close the deal. Meeting your target means you get a step closer to your bonus and the company operates that way to maximise its sales and profitability. But wait, what does a sale discount actually do? It eats into that profit margin.
It makes sense, therefore, that if you can avoid a discount then you should.
Do not automatically say yes to discount requests
It’s not unusual for a prospect to ask for a discount, but a prospect asking for a discount before they’ve even really got to grips with your product is a real red flag and you need to pivot the conversation away from it.
Try to keep the conversation firmly rooted in the realm of product value. Talking about price pivots the conversation towards price and, if you think about it, price is rarely a motive to buy, value us. If I offered you something you don’t want or need for a nearly-free price are you going to suddenly want it?
It also sets a bad precedent that will stay with you for as long as you deal with this prospect. Every further opportunity that you have with them will become an immediate price negotiation, and one where the starting position and balance of power will be with them and not you.
Discounted price discussions also gives fuel to the idea that the prospect doesn’t value your product as much. Discount pricing tacitly implies that the product value to them is not as great. If you fail to push back or get something in return you are tacitly agreeing with them.
Of course that might not be the only reason that they are asking for a discount. It could be because they’re constrained by budget. Getting the budget out in the open as part of a well timed sales discussion is important to ensure you are able to recommend the correct product variation or pricing for them. That pricing may still not include any mention of a discount, however.
Lastly, and we speak from bitter experience where in our early days before RealtimeCRM where we built bespoke software, in every case the customers we brought on board where we gave discounts never really appreciated it.
They were the ones pushing the most scope creep, trying to squeeze as much support out of us as possible for as little as possible. In short, it was a validation of their position in that they did not value the product as highly as those organisations that it was targetted towards.
How to respond when someone asks for a discount
Whenever someone asks about a discount for RealtimeCRM we always make sure that we push the conversation down the road until after they’ve tried it. Remember it’s not the price that will hook someone in, it’s the value. We always respond with ‘we’re happy to discuss pricing but why don’t you give our trial a go? And then if we’re the right fit we discuss that’.
Often, if the CRM system is the right fit for the prospect then price doesn’t come into the equation at all. That said, we do have options on the table such as applying the discount to a year’s subscription but these are done from the point of view of value for the target client, not on price alone.
When they understand the value of your offering it strengthens your position whereas if you simply submit to the request immediately you don’t know how much leverage you would have initially had.
Another tack to take is useful if you offer a tiered service. By going through the an analysis of the prospect needs then a lower tier offering may be better for them. A benefit of this approach is that they can see clear value between a tier that is in their discounted price range and a tier that contains the value of the benefits they actually need.
It’s also often a good idea to just ask why the prospect is looking for a discount. You couch the query in terms of wanting to find out their budget. Perhaps they see themselves as not a good fit for the product (question whether this is a mutually benefit purchase) or they are having some cash flow problems right now (could you close the deal later in the year) or similar.
If you are confident that your product will save the business $x for them you can change the conversation to that. If the problem is to do with their budget this quarter you can be flexible and arrange for terms in their next quarter. But you won’t know unless you ask.
Getting an idea of what the buyer’s motivation is should be critical to you. Some buyers want to haggle because that’s what they do, but they would be willing to pay the normal price. Others may simply not have the budget for the normal price. You want to separate them both out and act accordingly.
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