The unfortunate maths of discounting – and what to do about it

discounting

Many organisations are happy to offer discounts – all the customer needs to do is ask. In other companies, the sales people are so grateful and familiar with customers that on many occasions you don’t even have to ask for a discount – the sales person just volunteers a healthy slice of the profit back to the customer. Let’s do the maths on discounting.

When we offer a discount, we take away the profit directly from our cash register and give it to the customer. Not a healthy way of running a business.

Sales people do not understand mathematics especially when related to profits – if you make 30% profit on products and you continually discount by 10%, then you need to sell 50% more product to make the same amount of profit – staggering and sad facts!

Are Discounts Necessary?

So what happens in your business? Are your sales people authorised to offer discounts? Are you aware of what types of discounts are being offered? Do we have guidelines on how and to whom we offer discounts? Does the team understand why we need to give discounts? Our advice is to ensure that the entire team is working on the same playing field when it comes to offering discounts.

Sometimes offering discounts is necessary – we do understand the realities of modern day business. But before we do this we should consider the alternatives to offering discounts – let’s review these.

Make sure you add value to the product, ensure that the client understands what the product will do for them. Will it save them money? Will it add value to their business or processes? Will it make their life easier?

Ensure that the customer understands if the product is discrete to your company? Why discount a product that can only be bought from your company – this is crazy!

Discounting Strategy

Have you considered offering a complimentary product that has a small cost to you but immense value to the customer? This is just an example of what you can do as opposed to falling into the trap of offering discounts right from the outset.

Other price defence strategies include letting the customer know that the price is already discounted, telling them a price rise is imminent, letting them know that these are the last of these products at this price.

If you are an organisation that pays commissions to your team, then you could include a condition in the incentive program that stipulates minimum Gross Profit Levels to be achieved before sharing out the incentives.

A suggested strategy also includes advising the client that you need to speak with a manager to have a discount approved – this is a sure way of weeding out tyre-kickers who are just out to hunt for the best price of the day.

Another suggestion is offering the client a voucher to use on a return visit – this at least will ensure that the client returns for more of your product and or services in the future.

Investing some time in your discounting strategies can be an unscheduled distraction, but could end up being a process which can put many more dollars into your bank account.

Why not invest some time in putting some of the above strategies in place?

 

Would your team benefit from learning more about asking questions that close sales?

Learn more about crafting a powerful sales process at Sales Training Program, B2B proven program used by National & Global Corporations on August 16-17 – perfect for any team seeking to level up in sales.