Cracking the Code on Effective Discounting in B2B Sales
Oct 17, 2023
Discounting plays a crucial role in B2B sales, but it's a matter that should be approached with care. In this article, we'll explore the significance of discounting in B2B sales, why you should be cautious about it, and the situations where it can be strategically employed.
The Uncomfortable Nature of Discounting
Discounting is often uncomfortable for both buyers and sellers in the B2B sales process. Buyers may feel they are being asked for more money than they should be, while sellers may fear the moment when a buyer requests a discount. The uncertainty of when and how much to discount can add complexity to the deal-making process.
As a seller, you have three options when a buyer asks for a discount:
Accept to discount: This can help close the deal faster but may impact your revenue and margins.Refuse to discount: This preserves the value of your product but may risk losing the deal.Trade the discount for something else: Offering additional value in exchange for a discount can be a strategic compromise.
Why You Should Avoid Discounting
Discounting should be approached with caution for two key reasons. Firstly, it devalues your product or service. Secondly, it can erode your credibility as a seller. Your role as a salesperson is to identify how your product solves your prospect's challenges and build a business case that justifies its value at a fair price. When done correctly, there should be no need for discounts.
In B2B sales, the goal is to achieve win-win deals, ensuring that both parties receive value. Pricing should align with the value the buyer receives from your product, promoting long-term relationships and repeat business.
Four Main Reasons for Discounting
Despite the caution surrounding discounting, there are legitimate reasons to consider it in the B2B sales process:
Reason 1: Closing the Deal Faster Offering discounts can incentivize hesitant prospects to make a quicker purchase, creating urgency. While it may increase the likelihood of closing a deal, it can also set a precedent for future negotiations and affect your revenue and margins.
Reason 2: Competitive Pressure When faced with strong competitors offering similar products at lower prices, discounting may be necessary to remain competitive. However, this can lead to price wars and decreased profitability if not carefully managed.
Moreover, if the potential client possesses qualities that make them more attractive than others, like having a strong brand, you might consider "buying the deal." This involves reducing your price significantly to secure the contract, leveraging their brand reputation to benefit your business. However, it's important to note that this strategy can be risky and is generally advisable mainly for early-stage startups.
Reason 3: Upselling or Cross-selling Discounts can strategically be used to upsell or cross-sell additional products or services, increasing the average transaction value and enhancing customer satisfaction. Yet, it must be done in a way that emphasizes value, not just profit.
Reason 4: Relationship Building In B2B sales, discounts can be offered to establish a partnership with the customer and gain entry to larger accounts. However, it's essential to discount based on commitments rather than potential promises, as potential often remains unrealized.
Stay tuned!