You Still Have a Quota in January. Be Cautious When Discounting Major Deals in December
Updated: Dec 15, 2020
Price can always be your negotiating lever but it's not the reason to buy.
Although it may vary based on how your compensation plan is structured and where you are at relative to overall performance, for most people, under most circumstances, using discounting to pull deals forward at the expense of your future funnel and credibility may not be the train you want to ride.
More specifically, when it comes to the ever so common “December year end push and war chest fueled specials” it is often wise to be cautious and remember you will still have a quota to hit in Q1.
Yes – you may be able to close an extra win or potentially pull a deal forward that may have been tracking for Q1, but for every deal you pull in not only are you giving up margin and revenue on that deal but potentially on any future deals where they do not move forward in December.
What happens in January & Q1?
Once you give it away you don’t get it back. When the customer is ready to proceed to a buying decision their evaluation will be based on the discounted price. It is very hard to tell a customer in January or beyond that the December discount special no longer applies.
It is also very easy to optimistically misread where the buyer is in their decision-making process and believe you are negotiating by offering an unsolicited discount for nothing in return - way before they are ready to make a decision.
As a best practice we recommend to not negotiate until there is good indication that you are the vendor of choice and the buyer has confirmed they need the deal done in 2020. Make sure that you are getting something in return for your discount – in this case a signed deal or agreement.
If there is no urgency or deadline for action from the customer don’t try to create it with a price discount. Follow and trust your sales process and leverage discount only if you are sure there will be an exchange in commitment. Time based discounts that sound like the infomercial blender commercial have little impact and will undermine your credibility and the long-term customer value.
When does it make sense to discount?
First - you are 100 % sure they were making a final decision to purchase between you and your competitors by year end. This will often be determined by budget dollar constraints. Many times (especially with public companies) budget dollars allocated within the fiscal year need to be spent or they will disappear. This creates a trigger that you can capitalize on.
Second – when the customer’s transaction is isolated. In other words, it is a one-off and is categorically segregated from your other service offerings to that customer. This will ensue that you do not create a new lower pricing benchmark thus eroding future revenue and profits.
What happens to your credibility and trust with prospects and customers?
You cannot act like a carnival barker in December and expect it to not impact your relationship and rapport with the customer or prospect afterwards.
If discounts are not handled delicately you run the risk of no longer be being seen as someone with a authentic interest in the clients best interest. Instead you may be painted in the light of a hit and run sales guy desperately pulling out all the stops to get a deal.
As your credibly and rapport dissipates so does their trust in you and the value of your company. In any future dealings the customer will always wonder if you are offering them your best price or if they should be waiting for your order now infomercial special.
To summarize –
Be cautious and thoughtful of which deals and accounts you choose to approach with end of year discounts. Make sure the customer is ready to make a decision that month and it is an extension of the natural negotiating process. This will most likely happen when your client tells you or acknowledges that decisions need to be made this year for budgetary reasons. Ensure that you have gone through all the steps in your sales process and have established value and a reason to buy before you jump to last minute price discounts.
Let price be your negotiating lever and not a reason to buy.