Have you ever thought that discounts could be bad for sales? We know it might sound counter-intuitive, yet there’s some truth in it. Given that you’ve arrived at this article, we assume that you were looking for answers about selling without discounting.
Yes, you might have found success in the past with discounts but what if you could have achieved an even higher revenue by selling at a higher price? It is a possibility that rebated might be cannibalizing sales and revenue.
Discounts may be killing sales
Today, we’d like to talk about why a permanent discount culture in your company can destroy B2B or SaaS sales.
Due to increasing competition, there’s a price cut trend in the marketplace. A lot of SaaS and service-based companies have developed a policy of discounted prices as a sales tool. But that happens basically because of a lack of design and discipline.
For SaaS companies, your Monthly Recurring Revenue (MRR) is what sustains you. Your users are often on a time-based recurring subscription so you’re relying on that recurring income to keep your company afloat.
This means if you offer a monthly plan, every 30 days you’re feeling the pain from that initial discount again and again. Your MRR will be less than it should be, because of the discounted price, and you have less cash flowing into your business.
They may even be killing your brand
Continuous sales and discounts can create holes in the foundation of a company, hurt your cash flow and ultimately destroy a brand.
At first, a loose discount policy might seem like a good way to close sales fast but, down the line, it could be catastrophic for business.
Prospects will know that every now and then they’ll be able to get a bargain or they’ll be able to negotiate with your sales reps. There’s no chance they’ll be willing to pay the actual price.
Is it competition or fear?
Here’s what happens a lot of time: The SaaS marketplace is hyper-competitive and you start to believe that a prospect, who compares different solutions, will only sign up for your service if you are cheaper than similar software.
You expect the potential customer to ask for a discount or negotiate in a way that you won’t be able to handle unless you give a discount. You’re afraid you won’t close the sale if you keep the price tag intact.
Or, maybe you’re just starting out and are acquiring your first paid SaaS users, so it only makes sense that you want more of them. A startup needs cash fast and that happens only if they grow a solid customer base. But still, is selling with discounting the best way to grow?
It’s because your business lacks design
But again all this is because of a lack of design and discipline. If you’re desperate to win the deal and you think that every subscription dollar has the same value to your business, then you are wrong. Not every customer is a good customer.
Think about it. Do you really want anyone to be your customer? No matter how grumpy, bad-tempered and thrifty they are? No matter how much time your support team will spend in handling an endless queue of tickets? Well, no!
Discounts might be repelling good customers
You want good users for your SaaS – and a good user is one that fits your value proposition, product features and has enough money in their pocket to pay you a profitable subscription fee every month.
When you think it’s OK to always give discounts you build a brand that is anchored around being the cheapest SaaS versus being the most valuable solution out there in the market. And if your only differentiator is cheap prices then eventually you won’t be able to compete in the market. At first, you might start to win customers but then the competitors will outpace you and push you aside.
Closing sales without discounting
There’s really not a lot of room for winning business when cheapness is your only competitive advantage.
The good users of SaaS solutions will opt in for the companies that bring on value, features and good customer care. Also, branding is becoming more and more relevant in SaaS because solutions start to seem undifferentiated in such a crowded market.
When the buyer has a dozen of similar options he/she will either go with the cheapest SaaS or the best branded SaaS. The difference is that the best branded SaaS will attract customers who are willing to pay more and stick around longer.
Branding vs. discounting
So, to win more sales without discounting you need to focus on branding and value. This means design, innovation, better marketing copy, uniqueness, friendly corporate culture and a lot more. Branding is the feeling that surrounds every customer-facing aspect of your company.
If you win on branding and value you can start to sell more without discounts.
A strong brand trains your sales team to build up the skills they need to really focus on value instead of discounts as a selling tool. They will also feel more confident and proud of the fact that they work in a leading company, as opposed to the cheapest one.
Should you drop discounts completely?
Some companies never run discount-based promotions. They just don’t. Of course, you should keep occasional discounts if you want. For example, Black Friday and Cyber Monday are typically associated with large discounts for SaaS solutions.
Still, you can shift your focus a little bit, and instead of a massive discount, offer an attractive price and top up with bonuses. A bonus can be more features, customer education or supplementary services. Give services with practically zero marginal cost as bonuses.
This way you give more for the same price, and are actually selling without massively discounting. The customer will appreciate the added value as well, and might also feel embarrassed to ask for a discount with all that he/she’s getting.