Discounts are the proverbial ‘double edged sword’. Discounting is without a doubt a powerful tool in the right hands when used sparingly. Having worked with so many organisations in the past, we have discovered that discounting is largely misused and can cause more harm than good. If you are a sales leader and wondering if your team is using discounting correctly, here are 3 signs that might point to misuse of discounting.
Your team is using discounting as a closing technique
Are you coming across more and more deals where the deal closed because your team member ended up giving a 10% discount?
You might argue that the discount closed the deal but our experience has shown that such deals are usually short lived.Also, because your team members did not put in the hard work of showing value, the chances of churn are much higher.
To see if discounting is being used as a closing technique in your team, is to review the last 10 closed deals and see how much your team members pushed back when the topic of a discount came up. In fact, you will be surprised that some team members are pro-actively offering discounts to close deals!
No one is asking why your prospect needs a discount
Any self-respecting sales individual will tell you that pricing objections are more about lack of value than lack of budget. We wrote about handling pricing objections in the past, one of the fundamental questions to ask whenever your prospect asks for a discount is: why do you need a discount?
Do an analysis today of the last 10 deals that gave out a discount and you will be surprised to see the number of your team members that avoided the harder conversation and started negotiation on how much discount to give.
Giving out a discount without asking for a reason is brushing the real problem under the rug: your prospect is not seeing enough value. As a sales leader, you want to make sure that whatever your sales team sells sticks and there is as little churn as possible.
Your team cannot answer the golden question convincingly: “Why did you give out a discount?”
We are not a fan of holding discounting powers to managers. That is not the way you want to run a sales team. A sales individual truly flourishes when he is the CEO of his own pipeline and that is why discounting decisions should be left to the sales individual. Having said this, we also believe that your sales team members should be able to justify every time they give out a discount.
If you are getting answers like:
“Wanted to close the sale quickly so did not argue”
“End of quarter”
“Wanted to hit quota”
Then you know that things are not all well.
No matter how justified your team member feels his reason is, you need to make sure your team understands that they discount for the right reason.
To sum up, discounting is not a bad thing. What truly matter is how well your team handles discounting and that they discount for the right reasons.