Do Discounts Hurt Sales?

The objective of the sales process is to communicate the price/value relationship and the unique selling proposition the salesperson is providing the customer. Think about that for a moment. If you’re going to spend all of your time demonstrating value and then at the last minute offer a discount, what does that say about everything else you’ve told the customer?

Great post on the Salesforce blog by Mark Hunter: Why Discounts Actually Hurt Your Chances to Close a Sale about the problems with discounting. We talk about this all of the time in our sales meetings, and I could not agree with him more. While I believe the discount can have a place in the sales process when used as a bargaining tool (longer contract term, more favorable payment terms, etc.), I have found it usually used as a crutch and a result of poor sales & marketing execution.

Early in my career, I worked for an upstart company in the financial information technology space called FactSet.  We were well known for having some of the highest priced, premium level analytics solutions in the industry, and the founder of FactSet, Howard Wille, was adamantly against discounting. Like this article, he regularly preached that our clients counted on us to appropriately price the value of our services up front — if we provided a discount just to make a sale, we were telling the client (and the market) that we knew from the beginning that our services were not worth what we were charging. Mr. Wille only wanted clients that appreciated the value of what we provided (at the time, we also did not have contracts — you could cancel your services at anytime if you were not happy).  As a result we regularly turned away business from firms that insisted on discounts.

It made sense to me twenty years ago, and it is a value I instill in salespeople on my team today. Discounting can work if used strategically, but will ultimately hurt an organization if used regularly.