SaaSam

Account Executive

Acclaimed Answer

Discounting your price=Discounting the value of your product?

Whenever my dad sees something listed as discounted or whenever a sales rep offers him a discount his response is almost always, "Well that just means it was X amount too expensive to begin with."

Often times I think that prospects also feel this way, at least on a subconscious level. Ultimately reducing the perceived value of whatever you're selling.

I'm super into psychology and the human mind. Had been reading up on studies into buyer psychology a while back and there wasn't really anything on this in the B2B space. (Buyer psychology can be wayyy different in B2B vs B2C typically because in B2B you're spending "other people's money" when making a buying decision.) Whereas in B2C it rang true more for services and less for products.

What do ya'll think about this sentiment in the B2B space? Would it be better just to accurately price from the get go and create value or would you prefer vast wiggle room and inevitably discuss discounting?

👑 Sales Strategy

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CoorsKing

WR Officer

7

Retired King of the Coors Knights

Regardless of what my champion thinks, procurement has a metric they have to hit. I could price $1 or $100, they will still try to knock it 10-15%. My prospects will be getting list price from me to begin with now until the day I die. If they successfully negotiate, cool, that’s just a part of doing business and I do not feel it devalues the product.

SaaSam

Politicker

0

Account Executive

I think depending on what departments you're selling to pushing for a discount can be pretty much expected whereas sometimes it's super Taboo. I've noticed IT professionals aren't typically outgoing enough to ask for a discount.

CoorsKing

WR Officer

0

Retired King of the Coors Knights

All I sell to is IT and holy shit these people negotiate harder than people on Pawn Stars. You must be getting lucky with those you sell to lol

SaaSam

Politicker

0

Account Executive

Not in the IT space anymore, that was about 4 years ago but yeah that was the feeling I got. A lot of the dudes I sold to just seemed like talking to another human was taxing enough. All they cared about was if it made their job easier and if so and it was in the budget they made it happen. The few times we needed to do some haggling was due to supposed budgeting issues.

newsalesguy14

Politicker

5

Account Executive

I always feel like it's weird to come in already with a discount, and I find that it devalues your product if people say "it's too much, are you able to tighten it up for us?" and you just go ahead and discount it.

I always go in at list price and have a conversation around it. If it doesn't fit their budget, then there are different levers we can pull to arrive at a price that works.

Too expensive? Let's look at less expensive packages first that might fit your budget.

Need the higher priced packages? Committing to a 2 or 3-year term length rather than 1-year will lock you in at a 10% lower price.

Can't pay everything up front? Our finance team really needs to operate with annual payments - would you be able to make the payment upfront if it were 10% lower?

Need a discount to make this come through? I can try and secure approval on a larger discount for you if that's what needs to happen for us to move forward with a partnership - but in order to get approval, I need a commitment on how soon you can move forward.

This way they are giving you something in return for a lower price, so it is mutual. Also helps you figure out the details needed to close the deal (i.e. timeline like in the last example)

SaaSam

Politicker

3

Account Executive

This is really the way I look at it too. If the customer has to give something to get something you run less of a risk of devaluing the product in their eyes because that "discount" still cost them something and sets you up to appear "worth it".

UrAssIsSaaS

Arsonist

1

SaaS Eater

So I think you are posing 2 different questions here, pricing accurately from the start means you are probably positioned too high compared to the competition and what you can actually deliver.

Having the ability to deeply discount gives you more tools in your toolbelt and can create the illusion for the buyer that they are getting a "good deal".

I personally prefer to price accurately and create value but there are many ways to skin this cat.

SaaSam

Politicker

2

Account Executive

I definitely think the "good deal" sentiment depends largely on the buyer persona and industry. Say you had a unique solution that enabled you to price way below the industry standard, if you do so it might create hesitance due to the "get what you pay for" way of thinking. Could also be a double edged sword though and create curiosity about why this company is so much lower than the other guys.

RedLightning

Politicker

1

Mid-Market AE

If you make a bad purchase for yourself in a B2C setting, your job is likely not going to be impacted. It's why challenger brands have trouble winning deals when they're better products. No one gets fired for picking salesforce.

A discount can absolutely be perceived like that, but it can also be seen as buying something below market value. As salespeople, it's our job to sell that.

The buyer wants to look like a hero in the now and in 6 months when they think back on how successful that solution has been. Discounts are an easy way to accomplish the former, but the latter is the more important factor.

SaaSam

Politicker

1

Account Executive

"No one gets fired for picking salesforce." Damn, I like that.

At the end of the day you're very right, a lot can weigh on a bad purchase, especially in a big company.

Would be a good point to bring up when trying to get the product team to make improvements and just simply build a better product, not just a cheaper one.

RedLightning

Politicker

1

Mid-Market AE

Yeah, Salesforce probably isn't the best example for this, but the CRM space is them, hubspot, and then a ton of very specialized CRM's that cater to specific niche's.

SaaSam

Politicker

1

Account Executive

I fuckin hate Salesforce, but what you say still rings true. It's been tried and tested and has, arguably, come out as the best well rounded CRM. Obviously if a CRM was built for your specific niche it's probably a better choice at the end of the day but will you be fired for choosing SF? Again, probably not.

LanceDollarz

Opinionated

1

CEO

I use discounts as an absolute last resort. Always sell the value of the product/service not the price.

SaaSam

Politicker

0

Account Executive

One of my first managers told me if a prospect gets too hung up on price, you probably didn't build much value during your conversations.

Very true to an extent, if you need/want something bad enough, you'll pay whatever you have to. Granted, few things are so important to justify a "name your price" situation.

Do.it.for.the.checks

Politicker

1

Account Executive

Ahhh the never ending debate of sales. Posts will be written for eternity on this.

My belief has always remains the same. Do not give without a get. And any request for a discount gets a simple "Why do you think we need to provide that? Just need to understand what your thought process is"

That question keeps the value of your product in tact but gives you the flexibility to do what you need to do. And usually gives a lot of insight into how they view your product, objections, path to close, etc.

SaaSam

Politicker

1

Account Executive

Definitely in line with the "do not give without get" way of thinking. Which is why I'm way against leading with a discount. My first sales gig encouraged this. They encouraged us to price like 20% over and hit them with the "but I'll bring that down to x just for you". Wasn't a fan of the practice

Do.it.for.the.checks

Politicker

1

Account Executive

Oh God thats dumb.

Now I've used on higher velocity sales cycles the "Hey, so you are aware we will be running a promotion through the last Friday of the month. I know its early in your evaluation, but are we able to aim for that decision date so I can get you the best price possible?"

LordBusiness

Politicker

1

Chief Revenue Officer

Most B2B buyers aren't as emotionally connected to the purchase decision as in the B2B space, so the "feeling" of discounting you are describing here with your father I don't think applies. That being said, most B2B purchases have an "unwritten rule of discounting" in place, where the buyer has expectation going into the deal that they will get a discount. This is why most pricing models have a degree of discounting variance built into the margin calculations during planning. There are a few companies who "don't discount" (LInikedin being pretty well known for this) - but again for the most part in B2B is an expectation (some large companies have procurement teams where this is their entire job)

poweredbycaffeine

WR Lieutenant

1

☕️

To your (and my) Dad: Ok boomer...

Let's get into SaaS pricing with a series of questions:
1) Logical pricing: How do you accurately price your services? Is it simply COGS + Margin to derive a price that provides a profit on your services?
2) Opportunity pricing: Is the price based on the cost of NOT buying your product aka "this is how much it would cost you to hire X developers to build this in-house...and we offer it Y cheaper than their monthly salary"?
3) FOMO Pricing: Do you charge x, which is slightly lower than your competitor, so that folks can buy into something because they know they need it and you offer a great price for it?

Pricing SaaS is UBER difficult because you cannot put a finger on how much a "good" costs, unlike a consumer good like water or a phone.

Justatitle

Big Shot

0

Account Executive

Procurement and everyone wants a deal man. Whoever doesn’t negotiate great for me but I’m always open to understanding if a 10% discount will take a deal off the table and get the deal signed it is worth it to me.

SaaSam

Politicker

0

Account Executive

Right, obviously that's going to depend on your margins and everything but you're right. If all it will take is a small discount to move the deal across you're probably better off giving the discount. Always best to try to get something extra in exchange whenever possible obviously.

My biggest issue is when you get someone so thirsty to close that they shit all over their own pricing. My director did this for one of the biggest deals of my career. Without consulting me, without bothering to even attempt to understand the situation. Resulted in virtually 0 commission for myself.

I was pissed.

Justatitle

Big Shot

1

Account Executive

Yeah that would irk me as well. Unfortunately some managers should never have become managers

ColdCall

Valued Contributor

0

Account Executive

Having sold for 7+ years and given plenty of discounts in that time, my current role has a hard-line "no" discount on subscriptions (SaaS product).

If people say it is too expensive, I have not done my job correctly. I've not clearly articulated the value, and don't understand how our tool solves the problem- and linked it to business objectives.

60% of my deals go via procurement, so yes they have targets to hit but you can negotiate with them and understand exactly why they need the discount. Poor vendor experience? Management specifically asking them to do this? People just normally say yes?

There is also an issue with what happens after the sale? If you discount 5/10% for a one year deal. Your costs will go up in that time. When it comes to renew they're then faced with a 10/15% cost increase, which makes the year 2 costs higher- or you have to discount more. Ultimately you may win in the short term, but long term you can lose.

We are able to offer discounts/negotiate on consulting (5% of overall rev), but the subscriptions stay as they are. Our company has something like a 1% churn rate, and customers stay for 10+ years.

Next time you are asked to discount, just say 'No' and see what happens!

SaaSam

Politicker

0

Account Executive

I honestly never thought of it this way but it makes a lot of sense. I imagine customers that choose you solely because of a discount are like employees who take a job solely for what it pays. As soon as something that pays me more comes along, I'm out. (I used to be this guy and learned my lesson the hard way) As with the customer, as soon as something with a better discount comes along, I'm out.

Would be interesting to see a study of companies and the discounts the offer correlated with customer churn rate.

ColdCall

Valued Contributor

1

Account Executive

Yes, has really changed how I view sales, for the better.

Quick search found this article: https://www.profitwell.com/recur/all/discounting-benchmarks-for-subscription-companies

Looks like they took actual data from 6k companies, and the more discount the more likely they are to churn- among other things!

SaaSam

Politicker

0

Account Executive

Thanks! I'll check that out and throw it in my Director's face next time he wants to discount away my commissions.

StringerBell

Politicker

0

Account Executive

I discount, but not a lot - 5-10% max. That’s what transparent pricing really means. I don’t discount 50% to look like a hero because that’s bullshit then and dishonest. I don’t mind discounting but it has to be for something like they sign by X date. Discounts for discounts sake are stupid.

Trinity

WR Officer

0

BusDev

In the B2B tech startup, discounting a product/solution (0->1M) is a given if one is looking for early adopters. After that, give a discount on multi-year contract, not 1-year. There are other ways to negotiate other than price discounting.

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