What to Do When Customers Ask for a Discount
Everybody wants a deal. Especially your prospects. While you probably think giving 10% or 20% off isn’t a big deal, giving discounts just to win business can cost you more than money. It can kill your company.
Maybe you think I’m being dramatic. You’ve been giving discounts for ages, and your revenue and customers are still growing. Right?
The problem is when your company has a discount culture, you might win a few battles, but you’ve already lost the war.
Companies Don’t Win by Being Cheap. They Win By Being Valuable.
The market is more crowded and competitive than ever before. You know when a prospect is talking to you, they’re also talking to your competition. And somewhere in the negotiation, that prospect will ask you for a discount.
Salespeople may get tempted into offering lower prices. After all, it does help close deals quicker, which can help you reach your sales goals.
The problem is, once you start down this path, it’s almost impossible to get off it. When you offer discounts, you position your company as the cheapest solution. It decreases the perceived value of your product.
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We’ve seen this exact situation happen in the consumer goods space. The market gets so crowded and undifferentiated that customers start picking the cheapest option or the brand they know and trust.
In SaaS, the only way to win on price is to be free and you can’t build a company like that.
Instead, we truly believe successful companies of today and tomorrow will win on value, and they’ll win on brand. And you can’t have either if you’re just trying to be the cheapest.
7 Ways to Say No to a Discount Request
When customers ask for discounts, they probably don't see the value in your products or are just looking for a good deal.
How can you deny such a request while also making sure that you don't lose the sale? Here are seven ways to engage the prospect in a conversation that convinces them of your value:
1. Ask About Their Priorities + Motivation
Many small business owners budge too soon. When a prospect requests a discount, they email back a coupon. See, there’s nothing wrong with incentivizing first time customers. But one of the first few steps of a robust sales process is understanding your buyers. You want to research and establish the needs, goals, and pain points of the prospect to sell to them effectively.
Did the prospect ask for the discount early on in your communication with them? Then you can request them to share what exactly they are looking for in your offering.
You can say: “I appreciate your request for a discount. Before we talk about it, I want to understand your priorities and what you’re looking for from our product. I want to provide the best recommendation for you and an accurate price estimate.”
2. Uncover the Gap in the Sale
Your customers want to extract the most value while paying the least amount of money. They are just doing their job when they ask for a better deal. Why not negotiate with them by asking something like — “What additional value do you need to make our offering worth the price we quoted you?”
With this question, you want to discover any gaps in the perceived value of your product. Once the prospect answers, consider it an opportunity to present a personalized value proposition that addresses their needs.
If you can clearly depict the transformation they will experience after using your product — the prospect may be willing to pay at your initial price point. Sometimes all you need to do is request the lead to sign up for a free trial of your product and explore your features themselves.
Here’s a social media exchange from years ago that demonstrates how you can nudge prospects to sign up for a free trial:
3. Be Transparent and Level With Your Customer
As soon as a prospect hears your product’s pricing, they ask for a discount. This could mean that they are short of money. Or they do not see the value of your product at the quoted price. Every sales objection could indeed be hidden behind such a price objection.
So ask them questions like, “Is the price a huge barrier in the final buying decision?”
- If they say pricing is not too big a problem, you need to show them the value in your offer.
- If they respond with an affirmative, you can consider offering them a monthly pricing plan. But they might probably not be a fit if your price is too far out.
4. Offer a Month-to-Month Financial Plan
Would a month-to-month plan be enough to get you to close the deal today? If so, it could help you avoid a discount on your product. Your prospect can experience the value of your product first-hand. If they like your product, you may be able to upsell or cross them into an annual contract down the line.
Such monthly deals work best for prospects that don’t have the money to pay upfront right now, but they resemble your ideal customers. Your monthly payment plans can be priced about 10 to 20 percent higher.
Some sales professionals may not be able to offer month-to-month plans because of their company’s policy. However, if you can, it can help you close deals at the full price of your product and retain profit margins.
5. Turn the Question Around
The CEO at MTD Sales Training, Sean McPheat, recommends you turn the tables on the prospect to uncover their objections. A couple of questions related to pricing that he recommends are:
- “What were you looking to pay?”
- “Are you saying you can’t afford to continue paying the cost of the problem, or you can’t afford the solution?”
Asking one of the above questions will reveal if the prospect has still not bought into the value of your product. Or if your product is simply out of their budget. If they are not sold on your value, you have to research your prospects, and position your product as an investment — not a cost center. Here’s Steli Efti throwing light on the subject:
If the prospect doesn’t have the money but seems like a great fit, you can consider structuring a deal for them to complete the sale.
6. Offer a Quid Pro Quo Discount
Effective negotiations seek a middle ground that works for both parties: the seller and the buyer. So rather than offering discounted prices, your sales team can occasionally take a quid pro quo approach.
You can say something along the lines of: “I can give you a discount on the highest pricing tier or if you buy a minimum of 5 seats.” You can also ask them to be the subject of a case study or request referrals in their network.
You want to get some non-monetary benefits out of the deal for yourself so you strike a win-win deal that benefits both parties. Remember to ask for what you can get in return before giving away something.
7. Deny - But Don’t Close the Door
Sometimes your prospect may be enthusiastic about your product, but they just don’t have the budget to buy it. The right way to deny their request is not to say a direct no.
You can gently ask them: “How about we connect again next quarter? Do you think you’ll have some budget to buy a product like ours then?”
You want to exhaust the other options we discussed above before exploring the last one.
Drawbacks of Giving Out Discounts
Discounts may end up hurting your client relationships more than benefiting your business. For instance, if an account gets used to a discounted special deal, they may never want to pay you the full price. Here are three other specific reasons why handing out discounts could be a bad idea:
❌ Discounted Customers Churn More Often
While a discount can incentivize a prospect to buy and improve your bottom line, it can hurt your company in the long run. ProfitWell found that new customers you get through discounts have inferior retention rates. Their lower willingness to pay also translates into a higher churn rate and a decreased lifetime value.
❌ You Might Piss Off Good Customers When They Find Out They're Paying More
Let’s say a slightly larger company aggressively negotiates a big discount. A few months later, a smaller company comes, and your sales rep says, “this is the best discount we can give. I can’t go any lower.” I guarantee at some point, your customers will talk to each other. And when they do, the second customer is going to be pissed.
And rightfully so. You lied to them. You betrayed them. And they have every right to get loud and aggressive and drag your brand through the dirt and tell everyone they know how terrible you are.
❌ It's Harder to Scale Because You Don’t Know Customers' Actually Worth
The other huge issue with discounts is that they make your business completely unpredictable and unscalable.
Instead of a Basic, Pro, and Business plan where you know how much revenue you make for each, you’ve got Customer A with a 12% discount, Customer B with 14%, and Customer C with 2 free user accounts. Good luck trying to build models or forecasting your future revenue, or even figuring out what’s going on with churn.
Those discounts are going to undermine your entire financial structure because you don’t know what a customer’s actually worth. If they remove or add seats, you have no idea what that means in true revenue or churn.
It’s going to cause problems for your support team, your success team, and your marketing team. Even your product people are going to get angry because they’ll have to build all these backend solutions to keep track of billing on all your different discount cases.
There’s a Big Exception: Enterprise
Discount culture is bad for most companies. But there is one big exception.
If you’re selling to enterprise clients, the way you handle discounts is going to be completely different. You can’t just give them a price and say, “This is what it is,” because that’s just not how they work.
Most enterprise companies have a procurement department whose entire job is to get discounts. They have a discount quota to meet, and if you won’t play ball, they’re not even going to consider your company.
That’s just the way their organization is built, and you’re going to have to offer discounts if those are your ideal customers.
Instead, build discounts into your enterprise pricing or offer tiered packages based on seats, usage, or other premium offerings.
Trying to Win With Discounts? You’ve Already Lost
If you don’t value your solution, your customers won’t either.
So, if you feel like you absolutely have to offer some sort of discount, make sure:
- They’re standardized (and don’t budge!)
- You’re getting something equally as valuable in return
Sell your prospects on value first and make the discount an added bonus. Not only will this give you a stronger brand, but it will set you down the right path for real, sustainable growth.