The Neuroscience Behind the Discount (And How to Stop)

Posted by Emily Macaulay on Mar 14, 2019 6:45:00 AM

Salespeople have bad habits, just like the rest of us. We all know this. Perhaps one of a seller’s worst habits, however, is rampant discounting. This habit is insidious, hard to break, and downright destructive. It falls straight to a company’s bottom line and eats up margins like PAC-MAN.

But, why do these bad habits continue even though the company, its management, and the sales teams know they need to stop?

PAC-MANFirst, let’s break down what is happening when discounts occur:

  • Buyers create a supplier short list – they see value or you wouldn’t be at the table
  • Buyers want and need to buy – they will place the order with someone eventually
  • Sellers want to close the deal – it’s how they get paid and makes them feel good
  • Closing is the last stage of the sale – sellers have had to work hard to get there
So why is it so hard to close without a discount?

The short answer: fear

The long answer: habits are hard to break because they are hardwired into our brains. Constant repetition creates a neural pathway, a highway that gets easier and easier to get to the more times you go down it. When we do something repetitively, read: discounting, it becomes wired into our brains as a habit, because it is now part of what our brain sees as the right thing to do—the shortest route to success.

When you add pleasure to habits, perhaps something like money, the pleasure centers of the midbrain start firing, and keep firing well after the habit stops or the deal is closed. This is a direct hit of dopamine to the brain – it just plain feels good to activate the reward center of your brain.

The conclusion is simple, when we couple a habit (discounting) with a reward (money, or a commission for closing a deal), our brain can’t help but think this is a great thing to do to close a deal. It’s no wonder salespeople give out discounts like Halloween candy!

But that’s not all. Even when they’ve broken the bad habit, most sellers lack the confidence to close deals without discounting because they either do not understand, or do not believe in the value of the product/service they are selling. This is a problem. Today’s buyers demand increasing levels of insight and understanding from the folks selling to them.

The lack of confidence salespeople demonstrate can be symptomatic of a lack of attention to value and in doing so, they diminish their ability to communicate and have confidence in the value they bring to the table.

How can we stop the madness? Let’s have a look at what organizations can do to help sales teams stop discounting, and start confidently selling based on value:

  • Make sure your salespeople can understand and articulate the value you provide to your customers: use insights into the buyer’s industry, their customer base, the competition they manage, and the challenges they face as a starting point
  • Get Executives off the White Horse: stop modeling poor behavior by undermining your sales team’s efforts at the last moment by granting discounts to make the number at quarter or year-end
  • Plan your negotiations: Know the buyer, understand the selling scenario and develop a winning strategy

Finally, empower the walkaway. If Poker Players are jerking your salespeople around, let them go – most of them weren’t going to be very profitable anyway. 

So, if your sellers lack the ability to close the deal without a discount, make sure you aren’t rewarding bad habits. Then, make sure your sales teams have the Backbone to articulate value, and defend their price to close the deal.

To help jumpstart your sales team’s efforts to sell based on value, we’d love to send you an article on Give-Gets, and how they force the buyer on the other side of the negotiating table to reveal the true value of your offerings.

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Topics: Negotiating with Backbone