Business negotiation – What to do when someone asks for a discount

The Small Business Coach

You’re right on the cusp of getting a new client on board. Looks like it could be a pretty profitable one too. All that hard work across the different parts of the sales funnel are finally paying off. They found you because of your Google Ads, you’ve had a phone call, maybe even done a presentation or a demo and then you’ve provided them with a proposal. That was a couple of days ago so now you’re going to phone them back and close the deal… or at least, that’s what you think you’re going to do…

The closing call goes well at first. You answer all of the outstanding questions, and they’re happy to go ahead on one condition… you lower the price. They want a discount and that’s going to cut your profit margin by at least half, maybe more. But you really want to close this deal so what are you going to do? Here’s a few options for you to think about, some of which require additional planning beforehand, but that additional work will be worth it if you want to negotiate a better business deal.

Strategy 1

Give them the discount. After all, you want their custom and this gets you off to a great start. The benefits are that it removes the barrier to sale and instantly closes the deal. The bad news however, is that your profit margin has now taken a hit and you’ve set a precedent for future transactions.

Strategy 2

Tell them you don’t offer discounts and that the price you offer is already as low as you can afford it to be. The benefits are that you’ll get a decent profit on your sale, that’s if the sale goes ahead. There’s every chance that your prospect is “working” a number of potential suppliers so this strategy could end your chance of a sale altogether.

If they do mention that a firm elsewhere has offered them the same product or service for less, suggest that they provide you with a copy of the competitors quote and you’ll match (or beat) the price. Bear in mind though, that in doing so, you’ll have given them a discount and got the relationship off to a bad start by refusing them a discount in the first place.

Strategy 3

Do some prep beforehand and ask yourself, if the customer wants a discount – what can you give them instead that they would find value in? Adding more product or service for free is better for your bottom line than discounting an existing deal. Let’s look at a couple of examples to understand why.

Deal 1

Now let’s do a second example where instead of providing a discount, we provide the customer with free goods to the value of £200 instead of a £200 discount.

Deal 2

Of course, as all of your products and services already have a mark-up, a £200 freebie to your customer doesn’t cost your business £200, it just costs whatever you paid for it from your suppliers – in this case just £75. The net result is that you have just netted a bigger sale at greater profit than in the first example and most importantly, your customer still feels he or she has got a good deal. It’s a big win-win.

Option 4

This option also requires you to do a bit of prep beforehand. But this time, instead of thinking about the extras you can give your customer for free to try and maintain the sales value, you need to accept that you’re going to give your customer the discount, but consider what you would like in return for doing so. How could your business benefit from giving a customer a discount? Typical exchanges in return for giving your customer a discount are:

  1. Stating a minimum sales value – if you can increase your order to “xyz” I can give you a 10% discount

  2. Stating a minimum contract term – if you sign up for “xx” months instead of running month to month, I can give you a 10% discount

  3. Getting them to agree to (i) give you a recommendation (ii) be part of a case study in return for the discount or (iii) provide a glowing reference on request. This is a perfect way for you to accrue some “happy customer quotes” whilst giving the customer what they want. It doesn’t cost them anything in return except for a little bit of their time

So there you go, four ways you can choose to play the discount card and proof that a discount can be an opportunity rather than a hit to your bottom line.  If you’ve enjoyed this piece, why not spread the word and share it with your contacts.

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