Does your organization struggle with discounting?

Posted by Saad Shahzad on Aug 21, 2019, 10:48:12 AM
Saad Shahzad
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Do you think your sales team effectively sells the value that you provide to your customers? And how would you measure that, anyway?

Here is a simple test that we use with our clients:

  • Look at your current sales transactions
  • What is your average discount rate?
  • If the answer is anything greater than 0, your sales team is likely using price (meaning discounting) to close deals.

Obviously, this is an oversimplified example. Most, if not all, B2B organizations discount. But, the mere act of discounting quite literally means that your Sellers could not convince the customer to purchase the product at the list price. Why is that?

  1. Is the price incorrect?
  2. Did the sales team fail to communicate the full value being delivered to the customer?
  3. Are customer needs so different, that few can justify the full value of the solution?

In B2B markets, all three characteristics play a role in building a discounting culture. So, what should you do to get discounting back under control?

First and most importantly, you should create and implement structured ‘value-based trade-offs’ for your sales team to use in a negotiation instead of price. At Holden Advisors, we call these value choices Give-Gets. Give-Gets can be constructed using different parts of your product offering, wrap-around services, or even financing terms. When the customer asks for a discount, you use Give-Gets to take something of value off the table.

Easy enough, right? Well, it’s not always. Imagine the spectrum of situations your Sellers face.

On the one end of the spectrum, you have products often classified as commodities like basic food items, metals, oil, etc. For these product categories, differentiation is seemingly hard to come by. However, Give-Gets can still be very powerful. The key is to move your focus from the product, to wrap-around services. Examples include payment terms, delivery times, customer support, etc. Each of these value-added services can be used as Give-Gets.

On the other end of the spectrum, you have products in High Tech, software, security, etc. Often, products in these categories have very clear features that are easy to trade-off for a lower price. The key is to build a tiered offering structure in which these features can be stripped away, if a customer wants a lower price.

 

Product vs Service differentiation.

One of our favorite examples is a company who sold dirt. I think we can all agree that dirt is a commodity. However, the company was able to differentiate their product through wrap-around services. By simply creating a “fast lane”, this company was able to offer their customers a Give-Get. Want a lower price for your dirt? No problem, just please wait in line (30+ minutes). Need your dirt fast? No problem, please use this expedited lane at an increase cost.

I encourage you to work with your product, pricing and sales teams to develop these Give-Gets. Not only will it improve your negotiations, but your customers will also thank you for it.

Interesting in learning more? 

Download the Give-GetsSM Overview

Topics: Negotiating with Backbone, value selling