Doom Of Discounting
(and a quick video with more details)
💡 Today’s Slattery Sales tip: The doom of discounting!
Those of you who were in our training decades ago may remember the page from our old workbook titled, “The Doom of Discounting”. It’s SO important that I want to share it again with you here.
👉 Prospects will try to tell you that your solution looks like a commodity, and they can get it from a competitor for less money; it’s part of their buying process.
When they do, remember that discounting is devastating to both your quota and your enterprise – and ultimately your job.
Here’s why: Let’s say your company operates with a profit margin is 25%. This margin funds the future of your enterprise and is the baseline necessary for health and growth. 📈
Let’s say your quota is to close 10 sales this year, at $10 million per sale. With a profit margin of 25%, your enterprise makes $2.5 million with every sale you close. These are the dollars that fund the future; the other $7.5 million simply cover production costs.
When your prospect tells you that your solution looks like a commodity, and they demand a 10% discount, it might be tempting to give in to win a highly competitive sale.
➡️ But if you discount your solution by 10% – and you give up $1 million of profit margin – then you will have given away almost half of the $2.5 million profit margin you needed to earn on that sale.
To recover those lost margin dollars needed to fund the enterprise, you’ll need to sell more volume, obviously.
➡️➡️➡️ But here’s the catch: you won’t just need to sell 10% more to make up for the 10% discount… you’ll need to sell 67% more volume!
(Math: 10 sales at $10 million each with $2.5 million profit bring in $25 million profit. But at that lower price of $9 million each, now you need 67% more sales – that is, 17 sales – with just $1.5 million profit each – to reach the same $25 million profit your enterprise needs to survive.)
So your quota goes from 10 sales needed in a year… to 17 sales per year. That’s a massive increase in volume! 😮😮😮
Pursuing low-margin sales at high volume is a significant shift in business strategy, and should not be done reactively in response to market pressures.
To win at high value and protect your margins, equip your sales team to run a high-value sale so they can defend their value in the marketplace and avoid the prospect’s buying process at Wimp Junction®, even when competitors are saying, “We do that too, only cheaper/better/faster!”
Every sale is competitive. Sell your value well. Don’t discount.
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✨ Thank you for stopping by! Glad to have you here. ✨
At Slattery Sales Group, we empower great companies and sellers to win more business in less time.
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