Written by Sean McPheat |
4 August, 2010
Although we’ve spoken in the past about avoiding the discount question, there will come a time when we have to face reality and have to discount at some point.
What I’m referring to is damage control. How much you give away will affect your profitability, your credibility and the perception of the product or service by the prospect.
Start by asking some questions so that your response is more strategic and less knee-jerk.
Here are some:
* Why are they asking for a discount? This seems obvious, but it’s surprising how many salespeople start negotiating prices without ascertaining the real reason why they want a discount. There may be another way you can meet the buyer’s objective other than discounting the product. If cash-flow is an issue, for example, extending credit terms may be more valuable to the customer than a discount would be.
* What other pressure points might the buyer be facing? If time is of the essence, price is seldom as big an issue as speed of response. If your solution is the right one for the client and your competition can’t match your quality, again price is not the key issue.
* Will this set a precedent? Your discounted price becomes the reference point for the buyer on future purchases. Who knows whether they will see you as a pushover if you agree on this occasion?
* How will the competition respond? It might be that the buyer goes to a competitor and quotes your price, so starting a price war. Your retaliating competition may make it even harder for you to support this customer in the future.
* What happens to trust? Discounting tells the customer you could have charged less, but you wanted to make a bigger profit from them. Discounting confuses the pricing policy that you offer. If you cut the price on this, what about your other offerings? It can only build suspicion in the buyer’s eyes.
* What does it do to our overall pricing strategy? It may be that you can offer discounts for certain end-of-line products, or if you’re targeting sectors that carry a lower cost-to-serve. But if it’s random, what does it do to your overall pricing plans?
* Will this account be profitable in the long run? Or will they be more trouble than they are worth? Often, customers who hit you hard for discount don’t see the value in anything you do, and can be a right pain to service. Are they worth it? It might be more profitable to ignore their requests and look for a customer who values your services more.
* If you’ve diagnosed the buyer’s problems before discussing price, you will have knowledge of what is more important to him than price. So, what frightens them more than the price? Is is poor quality from a cheaper competitor? Bad credit terms from another supplier? Find out if there’s something more important than price in his eyes.
These thoughts will help you position the request for discount in a clearer way, and help you determine the level you offer, if you must!
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