Why discounting is slowly killing your B2B business

Is discounting slowly killing your B2B business?

While performing an account review for a client recently, we heard a seasoned sales rep ask “Can we ‘motivate’ the customer to buy?” Wait. Did we hear this right - did he just ask his boss for a discount?

If you’re selling a product or services within a complex sales cycle, it might not seem like a bad idea to throw in a discount to get that sale over the line. But here’s what happens when you dangle a discount to encourage a sale; the prospect now has that discount tucked away for when they’re ready to buy - not before. The sales cycle hasn’t been shortened at all, and your salesperson still needs to find a way to guide the prospect towards the dotted line.

While you might be able to absorb the occasional cost of a discount, this practice creates a mindset and crutch that slowly erodes your profits without making the intended difference of increasing sales. 

IS DISCOUNTING EVER THE ANSWER?

This doesn’t mean you shouldn’t ever offer a discount. Price can be used as part of your negotiations; but only when you are at the table, not as a hook to capture the prospect's interest. 

Recently we heard from a salesperson who told us that price was the reason all prospects hadn’t bought. We asked him, “have they all bought something else?” The answer was ‘no’. If the reason really was price, the prospect would have bought something else. Instead, they were okay with continuing without making any purchase.

This is a classic case of the prospect ‘doing nothing’ as a result of discounting being used as a hook, and price as a qualifier.

So what do you do instead? How do you stop discounting from slowly killing your B2B business, while increasing your sales team’s close rate?

HOW TO AVOID THE PITFALL OF DISCOUNTING

First things first, we can turn things around by changing the way we view sales. Instead of ‘motivating’ a prospect, we want to help the prospect make the right decision for their business. 

If you’re finding that prospects consistently see your price as being too high, they haven’t understood the value of your product or service in relation to their problem. This effectively commoditises your business, putting your offer into the category of “Product A or Product B - it doesn’t matter which one we choose.”

To avoid your product or service becoming a commodity and further falling into the ‘we have to discount’ trap, it’s important for the salesperson to understand why your prospect has to buy. What is the pressing problem your prospect needs solving?  

From there, the secret is to help the prospect understand how your product or service addresses that problem in a way no other offering can, and that’s done by creating value.

CREATING A CULTURE OF VALUE

It’s differentiation through value that takes you out of comparative pricing and puts you into a separate category from your competitors. Your prospect then voluntarily moves through the sales cycle as they clearly see how your offer solves their pressing problem. Discounting is eliminated with self-motivation taking its place. 

Looking at the bigger picture, keeping those extra profits creates a knock-on effect. It puts your business in a stronger position to differentiate even more in the future, driving further sales and revenue growth.

Another aspect to consider is that the best clients to work with are those who see the value of your solution. Value over discount not only moves a sale, it also means fewer headaches after the sale as your new client focuses on the solution.

JD, Founder of Sales Director Central explains it this way: “Of all the boards that I sit on, I have never heard anyone say ‘Let’s buy if they discount.’” Each and every time, decisions are made based on the perceived value of the solution. 

Business owners don’t have the time or capacity to deal with the potential fall-out of a bad purchase. Educating your prospect now on the value of your solution in relation to the problem, de-risks their decision in a way that discounting never can.

Apart from understanding why the prospect has to buy, it’s also important to understand when they have to buy. Will the prospect’s problem become bigger and more unmanageable if they don’t buy now? If not, then a discount won’t push the sale forward anyway. Understanding the self-motivation of the prospect allows you to prioritise their concerns, and help the prospect move towards the solution which is best for their business.

REVENUE GROWTH AND THE WAY YOUR BUSINESS VIEWS SALES 

Consistent sales and sustained revenue growth happens once a business changes the way they view sales. And a shift from “motivating to buy” to improving communications with the prospect, is one small part of this within the art and science of sales.

Ensuring these fundamentals are in place for your salespeople to have a common approach to sales helps you build and scale a high performance sales team. Whether you’re hiring your first salesperson or need to support complex sales teams across a large business, having a framework in place will help support your sales team, allowing them and your revenue to grow exponentially.

Sales Director Central helps businesses double their revenue through excellence in sales leadership. Connect with Sales Director Central here to find out more about creating and managing a high performance sales team for your business.