On this episode, we discuss how to respond when a prospect asks for a discount. Our Chief Customer Officer Ray Makela takes a deeper look about why the prospect may request a discount in the first place, and key questions to consider for selling value instead of price.
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Well, thank you for that question, it's one that I hear quite often. In fact, a lot of sales teams are challenged with that question of, "Boy, we're getting hammered, we continue to get asked for discounts, how are we supposed to respond to that?"
The first thing I would say is to respond with a question, "Have you done a good enough job selling value before that discussion? Where are you in the sales process? Have you had an opportunity to understand your buyer's problem to work through the impact of their problem and the solution you could provide?"
Because if you haven't done that, then it's premature to talk about price at all (other than qualifying budget terms). And if you're getting into a discussion about discounting too early in the process, the buyer is probably just kicking tires, or seeing "How much can I get now, and maybe more, later."
So, I'd want to see, "Have you sold value? Have you gone through your sales process first before starting negotiations?"
The second question I'd ask is, are you talking to the right person? Typically, surveys about buying behavior reveal that the higher you go in an organization, the less price sensitive buyers tend to be.
That means those that are at the C level, key sponsors of initiatives, are concerned about how they’re going to support their strategy, accomplish their business objectives, and improve the overall business and margin; as opposed to cost per widget or an individual pricing discussion.
So perhaps you're selling too low in the organization, and the buyer is focused on that discount as a way of getting leverage over you.
The next area I'd be curious about is, why is your buyer asking for that discount? And just by peeling that back a little bit, you can learn a lot— both about them and what's behind it.
Is the buyer asking because it's a budgetary constraint and they only have a certain set budget? Maybe there are creative ways you can work within that. Maybe the competition is given at a discount, and they're asking you to meet the competition's price (even though they're not comparable solutions) but they still want you to meet that price.
Maybe they just enjoy beating up the vendors, and so asking for a discount is something they commonly look towards. Or, they just want to look good in front of their boss and show that they could squeeze an extra 10%.
By asking some questions about, "Well, tell me more about that, why is that so important? What are you going to do? How is that going to improve the situation here?" You can learn a little about the interest behind the position of the discount, and think about creative ways of solving that don't include lowering your price.
And that's the final area I'd like to address, which is generating multiple options as a way of meeting a buyer's expectations and help in your negotiation leverage.
What that looks like is, if it's a budgetary constraint but you find out that well, that's just for this quarter, or that's just through the end of the year, maybe you can break the project up over a period or the components of it differently to satisfy that budgetary need. Maybe you can offset a lower price with larger volume and a longer-term commitment, which is good for you. Now you're trading on equal value and that's good for your business to get a larger order.
You can only do that if you're able to give this commitment to a larger volume. Or, you'll give that discount, but only after you reach a threshold. So, look at a rebate that might come into play.
By looking at creative options, you can think about satisfying what sounds like a demand, but in a creative way that’s more collaborative and satisfies your interests, which is not just going in and giving a discount.
Unfortunately, what I often see is when the client says, "Hey, I'm going to need a discount," what does a salesperson say? "Oh, where do you need me to be?" Which is the exact opposite message you want to be sending, that signals that they can get a discount. And if they get this much, how much more can they get?
It's a slippery slope, and suddenly you are competing as a commodity, and that's not where you want to go.
So, these were some ideas on how you respond to that question, "Hey, I need a discount." The first answer is, just say no.
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About Ray Makela