Early in my selling career, I made a rookie mistake. Looking back, it’s clear that my inexperience was to blame, and I learned a painful but invaluable lesson. So why do so many salespeople and businesses regularly make the same mistake today?
Here’s what happened: As a rep for a software company, I was competing for a deal with a paint manufacturer. After making numerous trips from New York to Florida and back—presenting, answering questions and building relationships with key managers—I knew that the customer was poised to make a decision.
My main competition was a small company that regularly and dramatically discounted in order to win. My company had an agreed-on price point below which we would not sell—even if it meant losing the deal. I knew that number well, but after investing so much time, effort and expense, I refused to be undercut. I closed the deal with the customer’s CEO for several thousand dollars less than the competitor’s final offer.
Naively proud to have brought in this business, I handed the contract over to our CEO—who refused to sign it. Instead, he had me call and inform the customer that we wouldn’t be doing business with them at that price. We withdrew the offer.
Needless to say, the customer was furious. I was embarrassed. And, of course, there was no deal. What was the point?
My CEO knew something that becomes clearer to me every time I see it happen (and it happens a lot): Regular, last-minute discounting is not a sales strategy. It’s a hole that you dig for yourself. Tactical discounting will erode your company’s margins until it collapses and ultimately buries you.
Yes, there are circumstances where discounting is appropriate, but most of the time, taking a different approach can be highly effective.
You must sell business improvement (theirs, not yours), not products or services. You can accomplish this by differentiating the unique value that you, your products and services, and your company can provide to help your customer achieve their goals.
That means getting in before there’s a deal on the table and establishing yourself as a knowledgeable, trusted and patient advisor. If you’re nowhere to be found before there’s an actual sales opportunity, you’re likely to be lumped together with everyone else, at the receiving end of all sorts of one-sided customer demands—responding to requests for information, doing presentations and demos, offering free trials, fighting commoditization, and fielding growing demands for discounts.
Capitulation is tempting, especially if you know your competition is coming in with a substantial discount. Don’t make the same mistake I did; take these steps now, and you may be able to avoid discounting in the future:
- Determine that the customer’s decision is not based solely or primarily on price. Don’t be afraid to ask key decision makers this question outright.
- Get agreement from the buyer that you understand their business objectives and that your offering can help them achieve those objectives.
- Find unique areas of additional value that you can provide through the capabilities of your product or service offering.
- Gain management support for potentially selling your offering in part now, and the rest later, rather everything at once at a discounted price.
When you are in a challenging competitive situation or being pressured by a customer, take the time to evaluate and test other approaches before you agree to lower your prices. Discounting should never be a default tactic.
Dave Stein, co-author of “Beyond the Sales Process: 12 Proven Strategies for a Customer-Driven World,” is a large opportunity sales strategist and an internationally-recognized expert in hiring salespeople, managers and senior sales executives. He has a rare and pragmatic view of sales methodologies, sales training approaches, social selling and the cultural, behavioral and operational changes required for corporations to excel at the sales function.