7 discounting strategies to protect your profits

Discounting is a crucial part of sales negotiations, but it requires a strategic approach to make sure it adds value rather than diminishes it. Here are my insights on discounting effectively to gain more and give away less.?

1. Standardisation and transparency?

One of the foundational strategies I advocate is the standardisation of discounting practices. By implementing a volume-based discount table, you can maintain transparency and fairness in your dealings.

For example, you might offer a 2.5% discount on deals exceeding ￡200,000 and a 5% discount on deals over ￡300,000. Sharing this information openly with clients, will help build transparent trusting relationships.?

2. Sharing risk and reward?

I recommend shifting the conversation from price to value by sharing risk and reward. This approach highlights the mutual benefits of the business relationship and steers discussions towards the value your product or service will create.

Selling on value moves the focus away from mere cost considerations and demonstrates your belief in your ability to deliver a return.?

3. Benchmarking rates?

Regularly benchmarking rates is critical. This ensures your pricing remains competitive and reflective of market expectations. Being able to state that your prices are, for example, second quartile can be very useful to combat overzealous procurement executives trying to make out that you are expensive.

In fact, one of our members used our BenchPress report to back up her claim that her rates were competitive, and she was successful in maintaining her rates.?

4. Building belief in value?

One reason why your team discount is because they think your rates are expensive. ?They lack belief in the value of your service or product. It is critical to convince your team of the value that you create for clients by sharing real examples of how your work has resulted in a financial ROI for clients.?

5. Negotiation tactics with procurement?

When dealing with procurement, start from understanding their motivations. Often, procurement people are incentivised to secure discounts. By slightly increasing your rates before you provide a quote, you give yourself room for negotiation. The client achieves their goal (a discount), and you maintain your target margin. It’s a win-win!?

6. Gross margin targets?

Targeting and rewarding your team on gross margin rather than revenue can help limit excessive discounting. Try implementing a formal approval process for discounts that fall outside standard parameters. This process creates a dynamic where senior management evaluates and approves significant discounts, ensuring they align with strategic objectives.?

7. Give-to-get strategies?

When offering additional discounts beyond standardised volume discounts, I recommend a give-to-get strategy. For instance, if a client requests an extra 5% discount, you could ask for commitments such as entering awards, providing video testimonials, or favourable payment terms. These additional concessions help offset the discount with tangible benefits for your business.?

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