Don’t Blame Sales for Discounts – It’s Your Fault

February 28, 2016 Mike Stiving

Salespeople frequently (way too often) offer discounts. That’s a fact of business. It may be fun to make fun of salespeople, but in truth they are just doing their job. To be brutally honest, they ask for discounts because you haven’t done your job well enough.

Turns out customers, especially those who deal with direct salespeople, almost always ask for discounts. It’s their job. Salespeople then take this information and either decide to hold firm on price (not that common), give a discount if they have the authority, or decide to ask for a lower rate from whoever does have the authority.

Sales people are most likely to give or ask for the discount. They would rather close the deal sooner rather than risk losing the deal altogether. This is true even when sales is paid a commission. A flat commission on a smaller revenue number means lower commission. Yet sales still tend to go for the discount.

There are two solutions to this dilemma, only one of which you can probably control.

The first solution, which takes executive and sales leadership to drive, is to change the compensation of the sales force. One solution that works relatively well is to set a target price at which you expect sales to be able to achieve. Anything over that pays a high commission. Anything under that pays a much lower commission rate. You will see many more deals closing right at that target rate. Of course you should set the target price at a number higher than the current average selling price. There are other sales commission strategies that may work better, but this one is a great example.

The second solution you have control over. It is your responsibility to make sales confident they can win at your price. When you simply launch a product, providing some collateral and maybe a demon in a recorded training, sales is not motivated. You have to give them the tools! How does your product compare to your competitors products and pricing? What types of buyers are willing to pay more? What other salespeople have been successful selling at higher prices?

There are many more tools and tricks you can consider, but the key takeaway is this: You need to accept responsibility. If sales is discounting your product it’s because it’s too hard for them to win at your price. What have you done to make it easier? What have you done to make them confident?

This blog post originally appeared at Pragmatic Pricing.

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