Holding the Line Against Requests for Discounts

By Geoffrey James

Because software has minimal manufacturing and delivery costs, customers often pressure software reps to offer steep discounts. Such situations present enormous challenges to even experienced software sales reps who are afraid of damaging a hard-won customer relationship by saying no to such demands. In many cases, what happens is customers make demands and salespeople end up running back to their management or R&D group to try to get those demands met. Such sales reps are known as doofers because they always have something they must do for the customer.

Ironically, offering special discounts usually backfires. Deals that are discounted so they’re unprofitable for your firm, no matter how much you feel they are strategic, likely will be honored begrudgingly at best. For example, if you promise gold level support though the customer is only paying for the silver level, even if you extract a grudging promise of gold level service from your support manager your customer is unlikely to receive that level of service.

Last-minute discounts are particularly dangerous. Rather than helping to close the deal, such discounts are an invitation for additional demands and usually delay the sale rather than move it toward closure. Worse, last-minute discounts can destroy your credibility. The customer inevitably wonders why you didn’t offer the best terms in the first place and may observe that you would have been perfectly happy to overcharge had the customer not forced the price down. Ouch!

But here’s the real killer. Steep discounts have an annoying habit of becoming public knowledge, spawning demands for similar deals throughout your customer base. Over time this can play havoc with the profitability of your firm, resulting in an inability to adequately serve all of your customers. Now you’ve got to cope with an entire crowd of unhappy customers.

Treat your firm’s official discount schedule as your bible. If your firm’s pricing structure is preventing sales, then you should work to change the discount schedule rather than try to work around the schedule to satisfy individual customers’ demands. While this seems counterintuitive to closing business, inappropriate discounting is a recipe for lousy customer relations.

The above is based on a conversation with Randall Murphy, president of Acclivus Corporation, a performance consulting and professional development company headquartered in Dallas, TX.