Why Discounting is Sabotaging Your Business

By Moira McCormick on April 18, 2017

Why Discounting is Sabotaging Your Business

Do you assume that your sales staff will always implement your current pricing strategy to the letter?  This could prove to be a dangerous assumption.

It's a fact that sales people often offer discounts before they should and this can potentially have a devastating affect on your bottom line - in fact it could just be considered an act of sabotage!

Have your sales team been brainwashed into thinking that discounting is the only way they can close a deal?  Do they so fear losing a sale because of price that they negotiate privately with themselves and come in too low? Instead of selling value they are throwing away your business’ profit much too easily, possibly at every opportunity.

In most cases this is not deliberate sabotage of course.  Occasionally staff feel that the prices you are charging are too high and believe that by discounting or giving away free goods they are being fairer.  Mostly though it's just to get the sale and the commission that goes with it.

 

Common Pricing Errors

 

Re-educating your sales force

Profit is necessary, not evil and discounting at every opportunity is a surefire way to lose that profit. As the boss it is your responsibility to make sure your employees understand that. They won't get paid if there is no profit, and every penny they give away affects your profit and their ability to get paid.

If you ask your sales team what they understand to be the ten most important responsibilities of their job, very few (if any) will include "protecting and maximising profits", “preserving price integrity” or “implementing my boss’ pricing strategy” on that list. Without them being educated to realise the importance of these responsibilities you may be subjected to both unintentional and intentional sabotage.

Your employees also need to understand the importance of selling on value - and that a premium price is a premium price because your buyer will benefit in some way from the purchase.  If your buyer does not believe that they too will profit from the purchase then they will not part with their cash. 

This "profit" may not be financial - it may be your superior service, product reliability or quality, a better environment, even better staff to serve them. These things all cost money and must be reflected in your prices. 

Some of your employees may not have considered these benefits before and are discounting merely because they are comparing your prices with similar products in the marketplace and simply believe your prices are too high.

 

"It's almost embarrassing at times the way people don't understand all the ways they bring value." says Tom Reilly, an author and value-based shopping expert.

 

Your sales people should be telling potential customers about the history of your company, to enhance confidence in the product. They can build up your success stories by documenting testimonials from past successes and showing them off to future opportunities. Selling on value also engenders customer loyalty which in turn leads to future sales and increased profit.

Educating your staff about price, profit and selling on value will greatly influence their selling attitude and behaviour - and discourage any unauthorised discounting.

 

The Addiction of Selling on Price Alone

So, you've educated your staff on the dangers of discounting at every hurdle but just how do you stop their behaviour?  Selling on price is like an addiction. Knowing the cold hard truth about profit may not be enough to prevent a relapse. You’re going to have to break the discounting habit cold turkey.

You are not going to be able to allow deviation from your set prices but you can have different prices that represent different levels of value – the basic, standard and premium model for example.

It is not enough to say that you are the only person who can approve a discount.  There must be no deviation from the policy of selling on value - it's a hard lesson to learn but if your sales staff have the option to discount, they will, always. 

There should be absolutely no reason to strip away at your profit and your pricing strategy must be strictly enforced.

 

You Must Stay Strong

No one suggests that this is a quick and easy strategy to implement but you must stay strong if you want to get your profitability back - and retain that profit. It does not matter how good your pricing strategy is if your staff are constantly discounting and undermining what you are trying to achieve.

The unintended consequence of heavily discounting at the wrong time and in the wrong circumstances will be that your buyer, sensing little value, chooses not to buy either now or in the future. You should sell based on value and leave the overused discount card to be played by others.

 

How

 

Related Posts

Why You Have Discounting All Wrong

The Discount Deception - Why Dropping Your Price Hurts You

10 Steps to Selling Value

Forget Cost-Plus Pricing - Sell Value Instead

The 7 Challenges of Value

 

Sources

https://www.entrepreneur.com/article/223410

http://www.businessknowhow.com/marketing/value-price.htm

http://smallbusiness.chron.com/differential-pricing-strategy-11805.html

The Discount Deception - Why Dropping Your Price Hurts You! by Victor Antonio, 2014

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