From the course: Pricing Strategy: Value-Based Pricing

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Discounting is pain management

Discounting is pain management

From the course: Pricing Strategy: Value-Based Pricing

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Discounting is pain management

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- What we see in many negotiations is that when the customer finally selects the vendor and the contract is ready to sign, they demand a discount. Maybe 5%, maybe 10%. It is very tempting to accept this because, well, you just have a contract in front of you for which you worked so hard, and even with a 10% discount, you still make some profit in this project. Here are two things to consider. First, discounts are double trouble. They lower your margin disproportionately and they have a negative impact on the value perception of your offering. Second, if the customer gets a discount for free, that is, without suffering for it, you train them to ask for more discounts. Hence, as a rule of thumb, a discount must cause your customer pain. I know, easier said than done. A friend of mine works as an independent accountant for medium-sized firms. When she pitches to a prospective client, she's often told that they would love to work with her but her offer is 15% to 20% above the competitor…

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