Games Sellers Play, Pricing/Discounting!

For those who’ve followed me for some time, you know I rarely take a hardliner perspective. When someone poses a question, “What’s the best way to prospect, How should we engage our customers more effectively, What are the critical metrics, How do we help our customers buy, ……,” my answer is always, “It depends…..” I don’t mean to be evasive, because it always does depend, every situation is different and we have to adapt to what’s best for each situation we find ourselves in.

But there is one area in which I am an absolute hardliner, I refuse to compromise, while I will listen to other arguments, I’ve never found one that makes sense. It’s around pricing and discounting. I never discount, I don’t believe there is a single situation in which a seller should discount.

And when we do discount, it’s because we’ve failed. We’ve failed the customer, our companies, and ourselves.

Unfortunately, we sellers and sales leaders have created a customer buying experience that demands discounting discussions virtually 100% of the time. We’ve trained our customers to demand discounts, we reinforce it in the way we engage them in their buying process, and they’ve earned every dollar of effective discount we give them!

Let me dive into this.

First, it’s the customer’s obligation to their organization to get the best “deal” for them. This doesn’t mean price. It means they are confident in the decision they make, they know they can manage the risks, the time to results meets their goals, the value the get in implementing the solution is superior to any other alternative they can achieve, and the value/confidence realized in reaching this decision is superior to any other alternative.

All of these things, together, represent the “deal” the customer is evaluating and on which they are making a decision.

Yet, sellers don’t understand this, instead of balancing each of the elements outlined, sellers make it all about the price of their solution. To a seller, the “deal” is about what the customer pays the seller. It’s very different than from the “deal” the customer is making a decision on.

Sellers make it about the price, not the deal.

• They engage the customer late, leaving all the heavy lifting of deciding/committing to a change process, defining the change initiative, it’s risks, the critical issues, the alternatives. We leave it up to them to figure out what they should be thinking about, who should be involved, and how they build consensus and support around a decision. Even though it’s something in which they have little experience, and we deal with every day, we leave them to do the work themselves–figuring it out without our help.
• When they do try to get us involved, whether virtually or IRL, rather than engaging them in talking about their business and what they are trying to achieve, we focus on talking about their needs for our products and why they should choose us.
• We fail to recognize, when they get us and our competition involved, they have done so much work that any of the alternatives they have shortlisted will achieve their goals.
• So the only way we are left to compete is through our price and when all else is equal, the lowest price wins.
• We fail to work with customers in the very highest risk aspects of their change process, we fail to work with them in helping build their confidence in what they are doing; as a result we have missed the opportunity to create value and for them to recognize that value in what they “pay” for that solution.

But it’s worse. We have trained our customers to ask for and expect discounts. So the customer in demanding discounts is doing just what we’ve trained them to do. How does this happen?

• Because we’ve missed the memo about value creation, we do everything around price. Because customers should get the best deal possible, we think it’s all about price. So we build into the process an expectation there will be a negotiation–not focused around better understanding value, but around the price. We provide a price, fully expecting the customer to negotiate.
• As a result, inherently we present a price higher than what we are happy with getting, because we have trained the customer to ask for concessions and a discount. And, as a result, we “skillfully negotiate” the price to the original price we really want.
• We fail to defend our price because we can’t defend our price–we, inherently, know it’s higher than we expect. And because the customer thoroughly understands these issues, unwittingly, we have betrayed any trust we have built with the customer. We have “deceived” them asking for a price higher than we expect, knowing we will go through the motions to getting the price we want. (As a sidenote, what an enormous waste of time for everyone!)

There’s another aspect to “pricing to discount.” Because we fail to create value in the process and are poor in articulating value realization, we have no ability to defend the pricing we propose. We are completely incapable of standing, confidently, behind our pricing, even though competitors price themselves less than us.

Inherently, this means we are in-confident or don’t believe in our ability to create value that justifies the investment our customers are making. We fail to recognize what the customer is paying for is the support we’ve given helping them understand the change issues, the risks, what they know, what they need to learn. We’ve failed to recognize that part of what justifies our price is the work we do in helping the customer successfully navigate their change/buying process. We’ve failed to recognize that helping the customer make sense of everything they are looking at and becoming confident not only in what they are buying but that they are doing the right thing for themselves and their company.

Stated differently, too often we don’t believe our own value! We are not confident enough on the value we create and deliver to defend our price. If we have no confidence in our value and the pricing associated with that, why should our customers be? Why shouldn’t they be demanding discounts!

I am uncompromising on discounting! This doesn’t mean I am inflexible on pricing.

When I started selling, I was fortunate to work for an organization that did not discount, period! We had the highest price solutions when compared to all our competition. But we were both trained and believed in the value we were creating and could proudly defend our prices. When I started, I kept going to my managers saying, “I need approval for a tiny discount….” Their response was always, “We don’t discount, we create differentiated value, it is a huge bargain to the customer at our full prices.” And, between the lines, they were saying, “If you can’t sell without a discount, we will find someone who can.”

Have I ever lost because I didn’t discount? As weird as this sounds, I can’t recall an opportunity I’ve lost because I chose not to discount. Having said that, there are lots of deals we have chosen not to compete because early in the process we determined the only goal of the prospect was lowest price. We are never the lowest price.

Have I ever lost on price? Of course. And probably because the customer didn’t share my view of the value we created–and that’s either my failure or my competitor created greater value than we did–and deserved the win.

Would I do something differently? Absolutely! But it would never involve discounting. I would focus on improving my understanding of the customer situation. I would improve my ability to create value meaningful and important to the customer. And I would improve my ability to make sure the customer recognized that value and understand the pricing in the context of that value.

Have I ever “adjusted” my pricing? Of course, but I have never discounted. We narrow the focus, we eliminate certain deliverables, we find ways to redefine the work effort–sometimes getting our clients to take more responsibility for the work. But we are always transparent about our pricing. We want to the customer to understand why we have established the pricing and how that relates to the value we are creating, delivering, and the customer will realize.

Are there customers that will, in spite of all of this, demand a discount! Absolutely, there are those we have trained so well, they will not buy anything without getting a discount. Inherent in this is they don’t value what we are doing with them. They are not our customers, we are glad to lose them. Good riddance! This is the way the relationship will always be, I’m delighted to make them someone else’s nightmare.

I am steadfastly inflexible on discounting. If we cannot create value, with our customers, that is critical to their success and justifies our pricing, then we have failed. If we are not confident enough in that value that we can’t proudly defend our pricing, then we have failed.

And we aren’t the only sellers that are committed to proudly defend our pricing/value. High performers are doing this every day/every deal.

Sellers have created this problem and it is on us do correct it!

We have to, first, be totally committed and believe in the value we create. Then we have to be adept in actually creating that and delivering it to our customers.

Afterword: Thanks to Jeremey Donovan for his patience and graciousness in dealing with my diatribe on his recent LinkedIn Post. He really helped me clarify my thinking.