In sales, every day presents new scenarios and great learning opportunities. One of the most common objections one hears from customers is,
“Can you give me a better price aka discount”?
Most times, the human mind wants to provide the discount, on account of our mental conditioning. But it takes seasoned sales professionals to negotiate the discount paradox and create win-win opportunities.
Let’s visualize a sales professional named John Maxwell, who has identified a huge cybersecurity product opportunity with the customer, which may be worth $ 1 million. This is his first big opportunity this financial year and John is excited. After going through multiple rounds of customer demos and decision maker conversations, John’s organization is selected for the project. And then the game begins. John meets the assistant manager at procurement who demands a 10% discount and if fulfilled, he will take John to his manager. John happily offers 10% discount and meets the manager along with assistant manager. The manager who wants to prove his worth to his organization demands 20% discount and if fulfilled he promises to take John to the VP. You know the story now. By the time John crosses all the levels and ends up meeting the CFO, the final authority to release a purchase order, John has already given all the available discounts and he has nothing left to offer.
Asking for a discount has become standard practice in most organizations – Thanks to mothers and grandmothers for instilling in us the art of demanding a discount, and being value conscious.
As a seasoned sales professional, I have witnessed many such deal closure or breaker scenarios and want to share some insights and perspectives to fellow sales professionals, when it comes to the discount conundrum.
It is a tug of war when a “Discount” situation arises between the buyer and seller, and this should always be handled with extra care, like fragile items. The key is for the seller to understand the beliefs behind the customer’s demand for a discount.
Some possible reasons for demanding discounts can be-
- Not establishing business value
- Comparing sellers with competitors
- Lack of enough or no budgets
- Games or tactics played to get discounts, could be as a measure of perceived value addition to organization.
Simply sharing the details and benefits of your product or service without connecting its value to the customer’s business results, leads customers to take the discount aka cost reduction route.
In such scenarios, your conversational agility is key. You need to first acknowledge the customer’s demand for the discount. And, then move towards a value conversation to align your product or service in a measurable and monetizable way. And while you do so, remember the power of customer centricity – keeping the customer and their issues at the core of your value conversation.
Listening to them about their specific situation and then sharing the way your product or service will have a positive impact on their business results and most importantly ROI (return on investment) will be important.
Shifting the conversation from price to value is a key skill for sales professionals to overcome the discount trap.
The comparison scenario is when your prospect compares you with your competitors. Buyers today are well informed, and they not only understand your pricing but also your competition’s pricing. So, it is easy for your prospect to ask for a discount.
Apart from acknowledging their demand for discount, you should appreciate their awareness towards competitors which tells us that they want the best for their organization. The best way is to show your customer previous client data, customer stories, testimonials and detailed demo of your product or service.
Some sellers make a big mistake here by belittling and demeaning competition. Rather than focussing on bringing down your competition, it is important to focus on highlighting the advantages of your product or service and what difference it can make for both the prospect and their organization in the long run. By showcasing authenticity and integrity with your customer, there are very high chances for the customer to go with your products or services.
The most common statement that we constantly hear from buyers is “We don’t have enough budgets”. Many sellers budge to this and try getting their managers to approve for a discount to close the deal. Little do they realize that they have not been fair to their organization by reducing the profits.
Whenever, a buyer mentions about lack of budgets, one possible scenario to consider is, “I have money, but I cannot allocate everything for you”. Considering your prospect has set aside a limited budget for you, you need to have an open conversation with them, on why they should increase the budgets. This can be achieved by drawing out a clear pricing and value plan and walking the prospect through the plan and clarifying that,
For a X pricing ,their value realised could be Y
By investing X/2, the value realised will be most lower.
Walking the customer through the plan will provide clarity and perhaps change the customer’s decision on discount. It is best to avoid being an aggressive seller here by compromising your service for their reduced budgets.
Tactics & Personal Recognition game
Buyers always tend to use the tactic of negotiation and gain some discount . This is also a way buyers showcase their value addition to their managers (higher management).
In such scenarios, you need to be subtle and tell the buyer that their personal recognition from the management cannot be compared to the value of your product or service. Perhaps, this level of honesty may rub the prospect on the wrong side. But “being soft on the person and hard on the issue” is a good was to have this conversation.
On the other hand, it does not mean you cannot give any discounts, especially if the prospect’s discount demand is within predetermined set discount levels. In this case both the buyer and seller experience a win-win scenario.
There can be many more reasons for buyers to demands a discount, but the above are predominantly the common reasons. Some basic components that you need to be aware of when having discount conversations are-
- Shift the playing field.
- Don’t panic or be aggressive.
- Don’t think extremes (what happens if the client closes the deal with others)
- Smile and observe his reaction – see with your eyes, listen with your ears and sense with your intuition
- Check with him explicitly why they are asking for a discount.
- It is okay to say NO.
Everybody loves a deal, or do they?
I might sound dramatic but remember, when the client asks for a Discount, your first thought should be “This also counts”😊