When, How and Why Salespeople Discount Products and Services
We often bring our two golden retrievers to a great local kennel
with very attentive local ownership. At $23 per day per dog, plus "play
time" and food, a weekend stay comes to about $140 for two nights.
However, when we travel on vacation and leave the boys for 7-10 days,
and add grooming to their week of pampering, the tab could run as much
When I pick up the dogs, Heather gives me the bill. When it's $140, I pay, she gets the dogs for me, and we leave. However, when the bill is $800, Heather gets really uncomfortable, and begins editing the invoice and always seems to get it under $650. Nice, right? Only if you're a customer. If you're Bob, the owner, who has no clue she is doing this, what must it be like for him?
He has a 150 dog capacity and on vacation weeks, is fully booked. Let's assume that there are just 5 of those completely booked full vacation weeks per year; The week between Christmas and New Years, 2 Winter Vacation weeks (public school and private school on separate weeks) and the two weeks around Independence Day and Labor Day. Let's also assume that the not everyone has two dogs. Let's assume that this only impacts one third of the customers during those four weeks. So that's 50 invoices being discounted $150 for 5 weeks or $37,500. And let's assume that during the 8 other busy summer weeks not already accounted for, we have half as much occupancy - another $30,000. I wonder what he would do if he knew that Heather was giving away $67,500 of his revenue without being asked?
So why is this happening and how does it relate to sales and sales management?
Heather has Low Money Tolerance. In her case, anything over $650 is A LOT of money. So she discounts the total, not to make the customers more comfortable, but so that she can be more comfortable! What would happen if her customers said, "Oh my, this is a lot more than I thought it would be...isn't there anything you can do?"
What about your world - you and your salespeople - how many of your salespeople have low money tolerance? How would you know? What is it costing you?