How To Offer Customers A Discount

Offer a discountMany companies have been affected by the current state of the economy and the lack of revenue that may be a direct result of this. Representatives often find these times difficult to find new business and want to offer the product or service at a discounted rate.

A sales management team needs to decide if it is possible for the company to offer its product or service at a lower cost while still generating a significant amount of money through the transaction.

Managers need to realize that the concept of a discount depends on how you structure the deal. They have to consider how long the company can sustain selling the product or service at that discounted price, according to Heather Kivett, President of Resolution Systems, Inc., a sales training and consulting firm.

“At the end of the day it needs to work for both the company and the buyer,” noted the executive. “Are you going to regret the deal a year from now?”

The sales team needs to know its margins and the price points, along with having a distinct idea of the long term value that customer is bringing the company. A good manager will help his representatives determine these things prior to allowing them to offer any type of discount, Kivett noted.

“You need to know what your time allocation and deliverables are,” said the executive. “Once you know that you can define a tiered discount that works for both parties.”

Representatives need to be careful about how and when the discounts are offered, as the way in which these offers are presented has a significant impact on how the company is perceived. The salespeople do not want to teach customers how to buy from them or constantly receive a lower price, according to Kivett.

“There are companies that are very successful who never discount their products and services,” said the executive. “For some of these companies, they would actually lose business by discounting because their clients are attracted to the exclusivity.”

For these businesses price infers quality, and they will often not like to be the discounted brand due to the negative stigma that is attached to this notion in some areas. Pricing a service can be much more important in certain verticals, so discounts would detract from the value, according to Kivett.

Businesses need to refer to their ideal customer profile to make an intelligent decision about what type of discount can be offered, if any at all, and to what extent they will go in order to maintain a positive sales relationship.

Certain companies like Chic-fil-A have distinguished themselves from other fast-food businesses like McDonalds by offering their food as a slightly more expensive alternative to their competitors. They have a different customer profile and market their product as a higher quality version of the other brand, according to the executive.

“One of the reasons customers shop there as opposed to McDonalds is the price,” said Kivett. “Price separates them from the rest of the market and defines their niche.”

They are able to charge more for their product because it is presented in a different way and is attractive to a different type of customer than the usual type of patron of McDonalds. Knowing the difference between these two markets can help a business offer a lower price but not undervalue what it is selling.

Discounts should be used to generate more business and find new customers, not to lose money or lower the price for existing clients.