Why do Sales People Discount? | Salestrong

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Why do Sales People Discount?

Why do Sales People Discount

Typically, when sales or business leaders approach me saying they need Negotiation Skills training for their sales people, it’s because they feel the sales people are discounting too heavily.  In this week’s post I will explore the reasons why sales people so often resort to discounting and what can be done to address this and maintain a greater proportion of the value.

 

  1. That’s what Buyers Expect!

Not so very long ago, as part of a diagnostic process, we were out observing one of our client’s sales people in action.  When it came time to close the deal, the customer asked the sales person for a discount, they immediately obliged.  Afterwards, we asked the customer what they would have done had the sales person said no to their request for discount.  Their reply was that “we would have bought it anyway”. Too many sales people assume that the only way they’ll win the deal is to offer some level of discount.

I once overheard a sales person telling their colleagues that they just “know” when the customer is going to want a discount and offer it before they even ask.  Firstly, there’s no way a sales person could ever know that.  Of course, if you believe that a competitor is offering the exact same solution at a cheaper price, this may well lead you to the conclusion that you’ll have to discount to win the deal (more on this later), but you can’t ever know.

What buyers do expect is a solution that, as a minimum, meets their needs (if not, exceeds), at a price that is fair in relation to the value that the solution brings.

 

  1. It’s the Only Way to Secure the Win.

As I mentioned above, there are times when the sales person believes that the only way to set themself apart from their competitors is to lower their price. A good sales person would never draw such a conclusion.  Yes, there may be the odd occasion when a competitor’s proposition may be genuinely better than yours (more so with technical product sales than services) but, under those circumstances, you would do yourself more favours by walking away – demonstrating to your customer that you are both credible and trustworthy.  Instead, the good sales person has identified and clearly communicated additional value early on in the sales process, using their in-depth knowledge of their products/services, their customer and the wider marketplace to identify areas of crossover, where their product/service offerings overlap with the needs of the customers in a way that the competitors do not.

 

  1. The Sales Person Lacks Confidence in their Solution.

Absolute confidence in your proposition will give you absolute confidence when it comes to negotiation.  Let’s imagine for a moment that you’re trying to sell your car –you have owned it from when it was new, you have full service history, know that it’s never been in an accident or had to have any work done on it, know which options you paid extra for when you purchased it and you’ve kept it immaculate inside and out. Before you put it up for sale, you do your research.  You look at what other cars of the same model, age, mileage and condition are going for.  A dealer in the next town is selling one almost exactly the same but doesn’t appear to have any history for the car.  You therefore advertise your car with a higher price tag than the similar one at the dealers.  When a prospective buyer comes to view your car, they tell you they’ve also been to see the one at the dealers and that it was cheaper!  They then try to negotiate the price of your car down to that of the one at the dealers.

There are 3 points worthy of note here:

  1. You know that your car offers greater value than the one at the dealers and the reasons why it offers greater value.
  2. Because you know what those reasons are, you’re able to effectively communicate this additional value to the prospective buyer, so that they too can see that your car offers them greater value.
  3. This in turn means you are more confident in the price you are asking and can negotiate more effectively, holding on to the value you know the car has.

Now let’s imagine you enjoy this level of confidence in all of the solutions you propose to your customers.  It would enable you to enter negotiations with greater confidence and, inevitably, hold on to more margin (or at least negotiate something in return for any discount).

Gaining this level of confidence in your proposition can only come from fully understanding your customer’s needs and using this information to create additional value for them, in a way that your competitors aren’t.

See my recent post on How to Use Questioning in Customer Meetings for more advice on how to achieve this.

 

  1. The Sales Person doesn’t know what else to Negotiate with.

This is a big problem for many sales people; they believe they don’t have anything else to negotiate with.  If your solution will deliver greater value than the competitor’s (whose lower price your customer is trying to bring you down to), then make that clear to the customer.  The competitor’s price is lower because they’re not offering as much value as you are.  Providing you have clearly demonstrated that additional value from an early stage in the process, it won’t be hard for your customer to recognise this and acknowledge it.

If the customer continues in their pursuit of a discount, agree to it on the basis that you get something in return.  That could be anything that’s of value to you and your organisation (and you may need to look wider than your own personal remit here) – perhaps this deal is part of a project that would make an excellent case study for your company to use in their marketing communications, perhaps payment upfront might help swing the deal and then there are the opportunities for up-selling and cross-selling.  Whatever you use to ensure you maintain a fair share of the value, make sure you use it. If you give something away, whether it be discount or free products/support, and don’t ask for anything in return you’re simply devaluing your offer.  Not only that, but it will instantly weaken your position in any future negotiations with that customer.

 

If you’d like to learn more about how we can help you and your sales team create and communicate value and negotiate more effectively, then please get in touch.

 

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