Basic Discount Management
Every time a sales manager gives a customer a discount, he (she) should feel the breath of shareholders behind him (her). And the staff of the back office, which a sales manager can leave without salary.
A concession (a discount) is more often expressed in money, terms, personnel or liabilities.
I have clients who ask for a discount when making each deal. There are customers who ask for a discount from time to time. There are customers who never ask for a discount.
Do I consider it necessary to give a discount?
Let’s find out when and how to give a discount to customers.
Why do you give a discount
A common rationale for giving discounts is to get more customers, grab a huge market share, accustom customers to buy from us only.
And then what? Discounts end and customers return to their suppliers.
To discount, or not to discount: that is the question
Therefore, giving a discount, follow the economic rationale – a discount can vary within the limits of reducing deal costs, your costs or back-office costs.
Example. Specialists go to a site for field work, the client asks for a survey of facilities at the site. In this case, the cost of works on a survey of facilities can be reduced in whole or in part by transportation costs.
Why a customer is asking for a discount
Take the rule at a customer request for a discount to ask “Why?”.
You should have a clear idea about a request for a discount: why they need it, why in this amount, why now.
Reasons that prompted a customer to ask for the concessions may be: fit into the budget, asked for the sake of curiosity, a boss asked, a desire to place a large order, because company X gives discounts, because company Y prices are lower, get a bonus etc.
Customers are different, everyone has their own needs – so ask “Why?” and listen carefully to their arguments.
What to do when a customer eats you by discounts
If a customer constantly squeezes out of you discounts (concessions) for the full – for price, terms, people, etc. – It’s time to think about the list of concessions.
Every time a customer asks for a concession and receives it you make a note on the list. For your part, for each concession to a customer, you try to get a concession for yourself.
Example. On an offer to provide a discount, you ask a customer to reduce the receivable or to increase the project execution period.
Ultimately, the list of concessions is a tool that will not allow concessions to uncontrollably expand. In addition, this list encourages you to ask for counter-concessions.
How to deny a discount to a customer
Do not tell the customer “No” or “We can not make a discount” or “Sorry(((“.
If a girl or a guy answers “No” to the proposal for a serious relationship, if a boss says “No” to the proposal for promotion. How will you feel? And if this action has taken place in public? And if it is already on youtube.com? It’s a disaster for a week, a month, a year, a life.
Approximately so will a manager of a customer feel after your “No, sorry(((“? And if this conversation was heard by his (her) colleagues? Boss? Vice President?
That’s how a customer feels when they say “No” to a request for a discount
Therefore, always explain to a manager of a customer why you do not give a discount. Because the manager of a customer will sell your answer to his (her) bosses.
Example. Deny a discount without arguments
Manager of a customer: How about a discount?
Sales Manager: No.
… After 1 hour …
Manager of a customer: I was not given a discount.
Boss of a Manager of a customer: They are not friendly at all. Look for someone else. Someone else who is friendlier.
Example. Deny a discount with arguments
Manager of a customer: I need a discount!
Sales Manager: When setting the price, we initially considered all possible discounts, because your office is only 600 miles away from us. Therefore, we reduced transportation costs to ZZZ. In addition, knowing your attitude to engineering communications, we have appointed our leading technologist on this project.
… After 1 hour …
Manager of a customer: They offered me a better price, eliminating unnecessary transport costs. I also insisted to include their best technologist in the project. And they did it.
Boss of a Manager of a customer: What does it mean “eliminating unnecessary transport costs”?
Manager of a customer: Our offices are only 600 miles away, so they have reduced the cost of the contract to ZZZ due to transportation costs.
Boss of a Manager of a customer: Well done!
Therefore, explain a refusal to make concessions. Arguments will help a manager of a customer to defend your “No discount” position before the leadership.
What if there is still no reasonable explanation? Use “Unfortunately, I cannot provide a discount. That is the company’s policy”. This is slightly better than “No” and includes arguments.
- Give only economically reasonable discounts
- Ask why a customer is asking for a discount
- Lead a list of concessions and ask for concessions from a customer
- Deny a discount to a customer with arguments