Note: I wrote this piece a number of years ago and I am still receiving feedback from salespeople, sales managers, and senior executives that it works well in today’s environment, no matter what sales methodology they are using. In fact, ESR’s custom advisory services projects are always priced this way. Our clients really like this approach.
Last minute discounting has become so prevalent that many companies have come to depend on it as their default sales strategy. Employing a go-to-market strategy of being the lowest cost provider is one thing, but dramatic, tactical discounting on every deal will erode your company’s margins and leave you digging a deeper and deeper hole in which your company will ultimately bury itself.
I don’t want to give you the impression that discounting is never appropriate. Here are three scenarios where it may be required:
How do you avoid discounting?
To succeed in B2B sales today, you must sell business improvement, not products or services. That means differentiating yourself from your competition in the unique value you, your products and services, and your company can provide toward your customer achieving their corporate, divisional, business unit, department, or governmental agency goals.
Have you transitioned into the mode of creating customer demand by targeting accounts—getting in before they know they have a need, and establishing yourself as a knowledgeable, trusted, and patient advisor? If not, you’ll continue to be on the receiving end of all sorts of one-sided customer demands, mostly taking the form of answering requests for information, doing presentations, demonstrations, free trials, fighting the constant battle against having your offering commoditized by the customer, and being on the receiving end of strong demands for discounts.
We’ve been taught over the years to bundle our products and services where possible to provide the customer with a single investment number. That way, we were told, they can’t nickel and dime you, and can’t slice up your offering, able to say no to pieces they don’t want or need. But now times have changed and when you think about it, that’s exactly what you want to do.
If you sell products or services that can be componentized, sold in pieces or modules, or in phases, you’re potentially in good shape.
You know your competition is going to come in with a substantial discount, as they have before. Your sales effort must include:
In cases where you know your competitors will be discounting, you’ll need to offer several investment options to your customer. Alan Weiss, “the consultant’s consultant,” suggests providing three opportunities for them to say yes.
If you offer your prospect three options to buy—let’s say for the sake of labels, Platinum, Gold, and Silver—and you’ve done a good job of selling the business value of your offering—you can avoid having to concede more than a nominal discount.
Your plan here should be not to discount, but rather to back value out of your proposal to meet the prospect’s desired investment level. Presenting three options lets you do exactly that. The customer gets to determine how much they want to invest and will enjoy the resulting ROI associated with that level of investment. Be advised that to do this most effectively, you’ll need some political, financial, and competitive selling skills.
Here is a template for the three options:
When your prospect tells you your competition has come in with a very low price, you can calmly discuss with them the fact that they have an option (the Silver option) that will provide them with what they need at a competitive price. You will already have differentiated yourself from the competition in a number of areas: understanding the customer’s business, industry, opportunities, challenges, competitive and customer pressures, and built rapport with the real buyer. In addition, you’ve professionally educated your prospect on the risks that befall companies who depend on tactical discounting to win.
What will the customer do? The may tell you they want your Platinum option at the Silver price. If you’ve done an effective job selling the business value of your product or service and built a relationship with the real buyer based upon trust, you can look them in they eye and tell them it just isn’t possible. What will they do then? According to our clients, more often than not, the customer will go for the Gold or Platinum option.
© 2012 — Dave Stein — All Rights Reserved
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