B2B and SaaS companies frequently discount their fees or offer incentives to close a deal. This is a widespread practice that may even lead to offering increased discounts at the end of a sales process. Because this is such a widespread tactic, we decided to present some information for you to consider, as well as several ways you can avoid discounting without losing the sale.

In one study, McKinsey and Company reported that as many as 70% of B2B companies will discount their fees in the later stages of their sales process. That may seem logical for companies that have invested a lot of time and energy into converting the sale, and don’t want to lose the sale at the end of the process. After all, who wants to spend all that time and effort and have nothing to show for it in the end?

Several practices – or policies – encourage late-stage discounting. These include:

• Using Sales Quotas: These create more pressure at the end of the quarter/month
• Lack of Differentiation: If your value isn’t clear, price becomes the main decision lever
• Commoditized Offerings: In this case, price is often seen as the easiest lever to move.

While it may help convert more sales, discounting also:

• Erodes brand trust, equity, and perceived value
• Encourages short-term wins at long-term margin loss
• Makes it harder to maintain pricing policy across accounts
• Attracts price-shoppers – the type of client that is loyal to the price, not your brand.

What can you do to end this practice, or at least rein it in to the point where it’s not hurting your company’s growth potential? Here are a few ideas:

1. Use Value-Based Pricing
2. Create structured and tiered offerings
3. Add value instead of lowering your price
4. Demonstrate the true cost of alternatives relative to your offerings in the longer term
5. Strengthen your sales training and compensation policies

Here’s a quick case description from one of our clients that may help you see how a change in approach can lead to less discounting, and faster growth:

Our client was in the final phases of closing a deal with a prospect, and knew the prospect’s budget, and which offering was most appropriate. The offering was above their budget. We guided our client to:

• Present the offering that would solve the prospect’s pain points
• Present the next lower offering in the tiers and explain what would not be addressed by it
• Gain consensus that the prospect needed the higher tier
• Explain that they could reduce the fee for the required tier if we could reduce the deliverables
• Ask the prospect to consider which deliverables they’d want removed from the offering
• Sit quietly while the prospect considered what to lose to gain a lower price

Think you have a client or prospect you cannot move away from discounted pricing? Set up a complimentary call with one of our pricing experts, who will guide you through a solution that will help your company.