To Discount or not Discount... That is the Question
The simple answer to whether your company should discount is “Yes”, every company in the market today is providing discounts; however, it can not be over simplified.
While the title may be a bit cliché, in today’s software market this is a serious question posed to sales teams regularly. Pricing is a driver for negotiations, and sometimes it will determine whether a deal closes or not. The simple answer to whether your company should discount is “Yes”, every company in the market today is providing discounts; however, it can not be over simplified. There are certainly times where discounting may be unfavorable to your sales process. We will look at the good, the bad, and everything in between in this article, when it comes to discounting.
Of course, discounting will help companies in closing deals, which is why a large percentage of software companies offer discounting in negotiations. Companies must find balance in discounting, and that is where the question to discount or not discount comes into play. Companies do not want to come to the buyer’s table with discounting at the forefront of their mind. You should always present your market value price from the beginning. Discovery questions will then allow you to decide where to go with pricing. There are certainly several legitimate reasons a prospect might want you to work with them on pricing, so discovery is a necessary step to decide how much to discount. Some companies might be so large that they want/need a discount on the cost of the product because of shear size of the company. When it comes to software sales the number of seats for large and small companies matters. The more seats the company has the more expensive a deal will be, so larger companies tend to look for per seat discounts to save on overall cost. Others may not have been in market for your product, but once they took a meeting with you, they realized a need. Thus, they have the budget, but need you to work with them as this was not initially something they had in mind. Uncovering latent pains through discovery is a major reason for discounting and working with a prospect on pricing for a need that just they just realized is always favorable for your sales team to get a win.
With every good discounting interaction there can always be those bad experiences as well. Some start up companies get overly discount happy. Buyer’s talk, and the word can spread that your sales team is easy to haggle down on pricing. This in turn can water down your product value and credibility. Sales reps can also fall into the trap of a buyer coming to the table stating that a competitors pricing is more favorable. It is possible that the competitor is already severely discounting their product, or maybe your product has more features. Whatever the reason, your company should want to empower your sales reps with the value of your product. Coming to the sales table with a fair market price should never be an issue for your sales team. In the end no one is going to win 100% of their deals, so it is also important to let your reps know that sometimes it is necessary to walk away from a deal. This is a good practice for any sales team, but it is much easier said than done. Typically, prospects who are only willing to buy at a very diluted price can cause future headaches for your company. These buyers will usually require lots of customer success help and will give your renewal team a headache at contract renewal. Obviously, there’s some balance involved in these interactions, so go into every negotiation with confidence.
Mercero has implemented a feature that can empower your sales team. A tool built with intuitive behaviors to allow your team to know the best price point for a deal. Rather than going into a deal blindly, or over discounting deals. Your team could present a price that favors your company and potential buyers. This intuition is built off of past contracts or similar deals, and deals in a similar price range. What Mercero has noticed with this tool is that companies are able to save large percentages on deals that they close. Where in the past a rep may have been discounting 15-20% to buyers that would make a purchase with a 5-10% discount range. This could prove huge for SaaS companies that are closing big ticket deals regularly. This is an immediate return on investment for just about every company, and Mercero is the only company that can boast an intellectual and intuitive discounting system.
