One of the worst behaviours in the realm of sales and sales management is discounting. The corporate euphemism is usually something along the lines of ‘providing the customer an incentive to buy.’
Hold on a second! Why does a customer need another incentive to buy if the product has benefits and offers superior advantages over the competition?
Discounting – or positively responding to such requests from potential customers – is self-defeating and bad practice. It is a negative not just for the seller either. It is also a negative for the buyer. How so?
First, giving away margin and price points upfront is rarely, if ever, a temporary situation. The new lower price is now the permanent price. A customer that has successfully obtained a lower price will demand the same going forward. Not only are customers prone to protecting their gains, but also the discounted price is perceived as the fair value price for the product or service. Any salesperson that agrees to a lower price should not be under any illusion that the loss will be made up later. There is no such thing as an introductory price anymore.
Moreover, prices are set according to costs, business plans and market conditions. Losing the required profit margin might imply incurring a loss and jeopardizing the seller’s longevity or security. Buying a customer’s business is the wrong notion.
Why is the lower price ultimately bad for the customer? It does several things. A buyer and a seller should maintain a mutually beneficial synergistic relationship. When one is threatened, the other should be concerned. The seller needs to provide after-sales support and, in most cases, enhancements, maintenance and upgrades. Furthermore, discounting tells the buyer that the initial price was dishonest and false. Not a good start to a relationship. Pricing integrity takes honesty and courage in the short-term, but is a good idea for the long-term.
- Maintain a healthy pipeline
- Allow your fair pricing policy to become your reputation
- Sell according to identified benefits and Return On Investment and
- Remember that a customer should not be a loss leader.