A discount can help accelerate a slow-moving deal, create goodwill, and give you leverage for requesting concessions.
But you’ll only reap these benefits by discounting strategically -- not whenever your prospect asks for one.
Promising your prospect a discount before the actual negotiation usually has three negative consequences. The buyer subconsciously attributes less value to you and your product. After all, if its ROI is what you claim, why are you so willing to sell it for less?
Premature discounting also shifts the focus from value to price. Instead of talking and thinking about your product’s potential impact on their business, the prospect is thinking about how much it costs.
Finally, you’ll lose some of your bargaining power. Successful negotiations require give-and-take. If you offer a discount in the beginning stages of the sales process, you’ll miss the opportunity to ask for something in return because you don’t yet know what your prospect wants. That sets a dangerous precedent of one-way concessions. When the time comes to put together the actual agreement, the buyer will be accustomed to getting what they ask for without giving anything up.
Of course, responding to discount inquiries during the actual negotiation is challenging too. You must satisfy your prospect’s expectations without destroying your profit margin.
If you’re struggling to find the right words, use these six replies throughout the sales conversation.
During the Connect Call
1) “You’re asking the right person. But before we discuss discounting, let’s figure out what you’re looking for in an offering. That will allow me to give you a far more accurate estimate.”
If the price of your product or service largely depends on the individual prospect’s needs, goals, and situation, it’s too early to discuss discounts. Without knowing the final value of the deal, you can’t determine a rate that will both satisfy them and keep you in business.
Brushing off the prospect’s question will make you seem more interested in your agenda than their own. Instead, acknowledge them and explain why it’s mutually beneficial to table this discussion until later.
2) “Good question. Do you see price being a major obstacle to this purchase?”
If your prospect’s request comes right after he asked for pricing information or your prices are available online, it’s possible he can’t afford your product at full price. He’s trying to learn whether you’ll consider a discount. Say no, and he’ll likely walk away.
Alternatively, he might be capable of paying the normal rate -- but interested in getting a discount if he can.
This question helps you figure out the buyer’s motivations. If he responds that price won’t be an issue, use response #1. If he says it is, delve deeper into his financial situation. You might need to disqualify him if your product is too far out of his reach.
During the Sales Presentation or Product Demonstration
1) “We can definitely have a conversation about specific numbers, but let’s make sure we’re on the same page about this solution being a good fit for your needs.”
At this stage of the sales conversation, a discount request usually indicates the prospect’s desire to buy. Since they agreed to a demo or presentation, they’re clearly interested in the product -- now they’re thinking about the details of the purchase.
However, don’t promise them a discount just yet. Automatically granting their request will make you seem overly eager to close, which will work against you during the actual negotiation. It may also lead your prospect to wonder if they’ve misjudged your product’s value.
Use this response to delay the conversation. You’re not saying a discount is off the table -- but you’re reminding the prospect it’s not relevant until you’re both certain there’s mutual fit.
“My problem with this attitude is that such clients assume that I am intentionally overpaid and that, with some negotiation, it should be possible to talk the fee down to the ‘proper’ price,” he explains.
In Appelo’s experience, prospects will often say they were “just wondering” and will go on to pay the entire price.
“Notice that I don't say ‘no’ to people who ask me for a discount,” he adds. “It's quite possible that they have a very good reason! It all comes down to customizing the value exchange.”
For example, the buyer might be dealing with a seasonal budget or experiencing a short-term cash deficit. Consider discounting in these cases -- but make sure you ask for something in return.
2) “I can offer you a discount if we [extend the contract, adjust the terms of payment, go with X package or tier, register Y seats].”
Compromise is essential to most negotiations. By offering a quid pro quo discount, both you and the buyer will come out ahead.
It’s a good idea to walk into the discussion with several non-monetary requests, which will help you open up the negotiating possibilities beyond price.
3) “What would be a reasonable discount?”
MTD Sales Training managing director Sean McPheat suggests using the prospect’s response to turn the question around.
If your product is $10,000 and the buyer says she’d like a 15% discount, ask, “Are you saying you think $10,000 is too expensive for [product] or you don’t want to spend more than $8,500?”
This reveals whether they’re not sold on the true value of your product or simply can’t afford it. If it’s the latter, offer them a reduced or less comprehensive option.
You might say, “Previously, you chose [more expensive option] because [it would help you accomplish X in less time, provide maximum cost-benefit savings, ensure you had enough coverage, etc.] But we do offer [less expensive option] for $7,600 if you don’t want to spend more.”
According to McPheat, this offer lets you maintain your margins while maintaining value.
If your prospect says they want the more expensive product at the lower price, on the other hand, return to the value conversation.
Here's a sample response:
“Your current product requires repairs and maintenance work approximately 10 times per year, which accounts for $3,300 in service and labor fees. You also paid $670 for new parts. Our data shows these machines tend to break down twice as often after their third year in use, so next year you should expect to spend at least $7,000 for the same costs. In addition, your productivity is seriously impacted each time it’s not in use -- costing you roughly $2,000 this year and an estimated $4,000 next year. Our product will save you upwards of $11,000 in just one year.”
Once the buyer remembers your product will save them money in the long run, they’ll probably back off or soften their request.
With these responses up your sleeve, you won’t dread hearing the word “discount” from your prospects.