The following is a guest post by Mark Hunter, author of High-Profit Selling: Win the Sale Without Compromising on Price about dangers of discounting to win a sale.
I am not naïve. I’ve been around the sales industry long enough to have heard every argument in the book as to why discounting is a viable tool in a salesperson’s arsenal.
And nearly every time, the argument fails to convince me.
I don’t mean to sound harsh. In fact, I am so committed to boosting sales motivation among salespeople that I go to great lengths to teach the skills that lead to sustainable profits.
I get why salespeople are quick to discount their price. Obviously, it can be one of the quickest and easiest ways to close a sale. Surface perceptions, though, miss the bigger problem brewing.
In my 18 years working in the sales industry, as well as my 14 years as a consultant, I’ve seen a common thread emerge when it comes to discounting.
Salespeople don’t comprehend the ugly impact that discounting has on their own career, as well as the company’s bottom line.
In my experience, there are incredibly few industries that effectively use discounting as a way to build profits. In fact, the vast majority of salespeople with whom I meet are not doing themselves any favors by discounting.
Here are three things you must know before you discount:
1. If you discount, you change the customer’s perception of value immediately – and permanently.
Don’t be fooled by the initial rush of adrenaline that comes when a customer is quick to buy when you offer a lower price. What has happened in that moment is that the customer has shifted their price/value relationship.
This is not a good thing for you, because whatever it is you are offering, the customer now associates a lower (less profitable) price with that product or service.
No big deal, right?! Wrong.
Going forward, the customer is always going to expect this discount. When you try to inch the price back up to where it should be, the customer’s disdain for the “new” higher price will be fierce and possibly even insurmountable.
Additionally, the types of customers you attract with discounted prices are usually high maintenance. They start to make demands that will be exasperating, not to mention expensive, for you and support people in your company.
You want the customers who understand that what you are offering alleviates a pain they are experiencing or meets a desire they have. These customers are willing to pay for those benefits. They understand value in a way that a customer hungering for a discount will never understand.
2. If you discount, you will never make up lost profit.
You may be lulled into thinking that quantity of sales at the lower price will make up for any profit you will be losing by not selling at the correct price point. Sadly, this is not the case.
Short-term and long-term, the profit loss will be incredibly difficult to overcome. You will have to work harder for less.
Don’t believe me? Sit down and run the numbers and you will see that you are better off closing fewer sales at full price than more sales at a discounted price.
3. If you discount, it will become your “go-to” method to close sales.
This is the biggest concern I think salespeople really need to consider before they discount their price. If you discount once, it becomes increasingly easy to do it over and over again.
As a salesperson, you will become accustomed to the sales that come easily when you discount. You may tell yourself that you’ll do it “just this one time,” but the allure of a quick sale is too strong.
At the same time, you start to believe that using the more difficult, yet more profitable, methods of closing sales at full price are impossible. Yes, impossible. You will convince yourself that the only way to close a sale is at a discount.
Fortunately, there is a better solution than discounting.
Learn the techniques that will set you apart and equip you to become an exceptional member of your company’s sales team. The people who use high-profit selling techniques will quickly remove “discounting” from their tool bag.
They won’t need it.
Whether you are a new salesperson, one with extensive experience, a sales manager or a CEO, you owe it to yourself to thoroughly understand the negative effects of discounting your price.
My guess is that once you grasp these, you’ll put your discounting days behind you. You’ll start experiencing the high-profit selling of which you are capable.
Mark Hunter, known as “The Sales Hunter,” has conducted thousands of customized training sales programs nationally and internationally. His client list includes Coca-Cola, Dole, Fisher-Price, Godiva, Heineken, Mattel, Unilever, and other industry leaders. You can find him on Twitter, Facebook, and Linkedin.