Tweet

Discounting: DON'T DO IT !!!

Written by: Craig Arnoff

Article Overview: When you agree to discount a product or service, it can serve to lessen its value and, consequently, hurt your chances of getting the sale or profitable customer relationships.

Discounting: DON'T DO IT !!!

Customers are trained to asked for discounts and negotiate. Why? Because salespeople often oblige and fail to realize that the customer already perceives a benefit and wants to maximize value by getting these benefits at a lower price. And salespeople, hearing repeated price objections, may themselves begin to believe that their products and services are not worth the asking price. When we lack 100% confidence and conviction in the value of our solutions, it shows---and the end result is that customers succeed in negotiating lower prices. So, what can we do?

1 - Quantify the benefits of your product or service to the customer and show the financial savings! Develop an ROI (Return-On-Investment) worksheet. Reference other customers who realized savings quickly. Clip relevant articles that support the benefits and payback of your product or service.

2 - Simply lowering the price deflates the customer's perceived value of your product or service. So, if you do need to lower the price, don't do it without asking for something in return (e.g., a commitment for certain quantities or shorter payment periods). And if you need to give something to secure the order, consider including additional products or services in order to minimize the financial impact on your firm (e.g., you provide the customer with a $250 service that may only cost your firm $100 to perform).

3 - If you have the ability to make concessions, don't let the customer know, or you'll invite additional negotiations.

4 - If the customer does ask for discounts or concessions, determine his or her motivation prior to responding. In many instances, granting discounts or concessions will not resolve the issue and will hurt your chances for the sale. Possible customer motivations include:
* The customer is not sold and does not believe in the value of your proposal
* S/he is comparing "apples to oranges" and doesn't understand why your product costs more
* The customer is sold but does not see how the benefits s/he'll get justify the price
* S/he is sold and as a good businessperson is simply trying to see if s/he can get a better price
* S/he is sold but wants a "personal win" (e.g., a "good deal" in order to look good to the boss)

Remember, while it is common for customers to ask for discounts and concessions, the best and most skilled salespeople are adept at securing orders by stressing value rather than reducing price.

Related Articles
  What is the best way to develop my sales skills?
  Profitable Online Business Ideas and the Recession Part 2
  Supersize Your Canadian Business Accounts Receivable Finance Success via Confidential Invoice Discounting Factoring
  Contribution
  How can you make more of your customers open your emails?

Article Tags:



Related Forum Posts
Different Types of Funding - Finance for business can be obtained through a number of different sources. Let's review some of those channels to help you decide what's right for your business needs: Grants There are over 930 different EU and UK grants and loans available from over 100 issuing bodies. This is the cheapest form of finance and an important part of the funding package that companies and individuals need. We can help you find your way through this maze. Technology Micro Projects: 50% of eligible costs up to £20,000 Research project: For a technical and feasibility study of an innovative idea for new technology 60% of costs up to a grant of £75,000. Development project: For development up to pre production 35% of costs up to a grant of £200,000 Developing an innovative idea: valuable for small companies and individuals at the start of a technical project: 75% of costs of hiring a mentor and consultants. Export To start exporting or moving into new markets grants of 50% of costs up to £20,000 each. Training and Education Knowledge Transfer Partnerships, Achieving Best Practice in Your Business, Investors in People Modern Apprenticeships New Deal for various grants. Environment BOC Foundation for the Environment: 25% to 50% of Project cost, typically £20,000 to £100,000 Clean up Fund: Emission reducing equipment up to 75% of cost Community Chest Fund: Up to £25,000 for projects near active SITA sites High Impact Fund: £150,000+ for larger projects near SITA sites Assisted Areas Regional assistance grants of between 10 and 35% for capital expenditure in less favoured areas of the UK. Loans Loans are an excellent source of finance if you have suitable security to borrow against or a reliable earnings stream. This needs to be planned and presented well to obtain funds. Credit cards Provides up to 56 days free credit if you play the game! Overdraft Banks are surprisingly supportive when presented with a well thought through plan and competent management. Bank Loans Lenders tend to look for a good business plan and security. Typically the loan is approved by a centralised back office function rather than the person you meet. Terms and rates depend upon the risk. Repayments can be very flexible to meet your specific needs. Mortgages These can include flexible repayment terms to meet your business needs. This can even be incorporated into your overdraft finance so that you have one flexible account for both personal/ business mortgages and overdraft Small Firms Loan Guarantee Scheme Up to two years trading: Up to £100,000 Over two years trading: Up to £250,000 However these are difficult to obtain and are a loan of last resort. Export Guarantee Scheme This is government backed insurance against appropriate export documentation. Mezzanine This is a halfway house between loan and equity. It can be an innovative way of raising funds for the more established business. Mostly for expansion capital. Equity This is not as easy as the papers would have you know. Only 1% of business plans received by Venture Capital Funds are successful. However, a good business proposition consisting of a strong demand for the product or service, management track record and a sound financial plan will enhance the chance of success. Business Angels These are high net worth individuals who are successful businessmen looking for investment opportunities. They can provide both time expertise and money. Typical investment size is £25,000 to £250,000 but can go as high as £2m for the right opportunity. Exit within 3-5 years. Venture Capital These are investment funds seeking high rates of return. However typically investments are over a million pounds. Some funds are targeted at lower amounts depending upon the sector and region. These funds are looking for exponential capital growth over 3-5 years. Asset backed finance This can cover machinery, sales invoices even sales orders. It can be a very flexible source of finance to the growing business Leasing This will cover your capital expenditure and spread the cost over a three to five year period. It is particularly useful if you do not have taxable profits to maximise your capital allowances. Sale and leaseback of a property you own is another good source of funds. Factoring Factoring offers a sales ledger administration and debt collection service. Up to 95% of an approved sales invoice is paid within 48 hours, quicker if required. Credit protection is also available to protect against a bad debt. The Factor will own and place a first charge over the book debts and they might also take other charges, depending upon the strength of the financial information. Invoice discounting Invoice Discounting can be Confidential or Disclosed; it depends upon the strength of the financial information. The service is the same as Factoring, except that the sales ledger administration and the debt collection is the responsibility of the client and not the Factor. Pre payment of the approved sales invoice is still up to 95% and the factor will still have a first charge on the book debt and therefore own the debt. This service can also have credit protection cover. All sales invoices need to be for a business to business debt, and some proof of delivery is generally required. Trade Finance This is funding provided against stock purchases, signed contracts and orders whereby the funder will prepay a certain percentage of the value Pension fund It may be possible to use your pension funds for a loan back to the business What do u think about it?


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Tweet

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Leader's Success Secret: Celebration

Your Local Small Business Online Marketing Funnel

Earn More Money - Easy Home Business Ideas

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.