Disclosing Discounts

#2-pricing-questions
1

IMPORTED FROM SKOOL
Original Post was posted by Meredith Clark on Aug '24

I would love to hear any thoughts about documenting discounts. Is there ever a reason to not show the provided discounts in your resulting contract with your client? Can it lead to downstream issues?

2

Ulrik Lehrskov-Schmidt • Aug '24

So just writing:

Price: $80

Instead of Price: $100 less $20 discount, total: $80?

Not a major deal, but here are a few concerns:

  1. Next year, procurement is going to ask for the discount they obviously didn’t get in year 1!
  2. It can lead to confusion around pricing on expansion sales as they expect similar prices there (this is true for all discounts, disclosed or not).
  3. It can be harder to determine which pricing scheme the contract was closed under: the old 2023 at $80 or the new 2024 scheme at $100, but… See more

Meredith Clark • Aug '24

@Ulrik Lehrskov-Schmidt

  • These are the EXACT reasons this needs to be documented.

Steven Meyer • Aug '24

Our new business sales leadership team is very anti-transparency when it comes to showing a discount on an Order Form or contract. They think it will slow down sales cycles if someone were to see that they only got a 5% discount and perceived that as not being big enough.

The issue we face is that we often reach a verbal agreement that a discount is only for the initial term, then a different sales team handles the renewal, and they struggle… See more

Meredith Clark • Aug '24

“They think it will slow down sales cycles if someone were to see that maybe they only got a 5% discount and perceived that as not being a big enough discount.”

Meredith Clark • Aug '24 (edited)

I think this is the reason we don’t want to do it. But I’m sure it’s more than just one reason.

To me, at least at my company, this implies that the procurement-facing sales team isn’t skilled at objection handling — and that’s fine because procurement and negotiation are hard. I do think that everyone wants to feel like they got a good deal, and actually writing this down does something psychologically for them, in our favor.

Carsten Kunkel • Aug '24

@Meredith Clark

The need to give discounts and the belief that their size will help close deals faster sounds familiar to my experience in a software company. Back then, the underlying challenges were:

  • The standard price list had been raised to levels where discounts (for many types of prospects) had to be the norm rather than the exception.
  • The definition of the “job to be done” (value proposition) had not been properly defined.
  • A sales team that struggled to communicate it properly and… See more

Meredith Clark • Aug '24

@Carsten Kunkel

  • Thank you—especially for the last two points. This corroborates my belief that people have specific skills, and we don’t always hire salespeople based on their negotiation abilities. And we definitely don’t incentivize them to do so.

Jerker Johansson • Aug '24

Two totally different scenarios (both in favor of disclosing discounts) that I know work well in certain cultures/industries/scenarios:

  1. Anchor your price (“list price”) with a high estimated value (“price $100”), negotiate what you need, and discount—preferably with a valid argument (see point 2).
    Send all invoices with the agreed discount disclosed. Transparent, easy. If everything in the agreement is good, the discount carries over to the next year.
  2. Understand that value goes both ways. Estimate what different… See more

Meredith Clark • Aug '24

@Jerker Johansson

  • Thank you! I really appreciate when people share real-world examples.

Christine Carragee • Aug '24

One of my favorite examples of documenting discounts was a $0 invoice from an oil change chain.

You pay for an oil change and receive “free” fluid top-offs whenever you go in. When you have them fill up your wiper fluid, they look up your account and print a $0 invoice with the full price zeroed out.

Sometimes, customers need to be reminded that they are redeeming something of value. The key is that you must have some customers who actually pay full price for the add-on.

Jerker Johansson • Aug '24

@Christine Carragee

Love this!

In my industries, the Public Sector is often a large segment with thick agreements stating what can and cannot be invoiced (due to historical mispractices). Sometimes, they specify that “stuff that is really needed for providing the service on a running bill cannot be invoiced” (e.g., consumables, service car, etc.).

I always argue:

  • Always do the same on any contract—if you use the car, punch that button.
  • If the car cannot be invoiced, set the price to $0 (or better, 100%… See more