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  1. Peter Gustafsson
    2023-10-10 @ 19:51

    This article discusses the role of pricing and discounts in sales strategies, emphasizing the importance of using discounts judiciously. Discounts can serve as a powerful tool in sales, influencing various key performance indicators. However, they come with both advantages and disadvantages, as well as potential pitfalls.

    Discounts are often used to adjust prices quickly or motivate customers to make purchases. To use discounts effectively, a clear goal must be established, and communication with customers should be skillful.

    A well-designed discount model specifies rules for the amount of discount, the product or service it applies to, the target audience, and specific situations. Examples include offering a 10% discount for signing a 3-year contract or half-price on add-ons during Black Friday.

    Discounts can fine-tune pricing models, allowing for swift reactions to changing market conditions, competitive pressures, or excess capacity that needs to be sold quickly. However, it’s crucial to avoid giving individual sales reps the authority to offer arbitrary discounts without a clear rationale.

    Discounts can motivate customers by creating a sense of urgency, fear of missing out (FOMO), or the desire to reciprocate. They can be driven by both irrational and rational factors, such as cost reduction, budget constraints, or the desire to get a good deal.

    The article highlights the need to avoid a ”Discount Culture,” as excessive discounting can harm a SaaS company’s positioning, sales culture, customer behavior, and profitability. It can also lead to increased churn and reduced customer lifetime value.

    The author advises against prematurely offering discounts and suggests distinguishing between good and bad reasons to provide discounts. To offer discounts effectively, it’s essential to be clear about the goals, be selective, understand customer needs, and request something in return.

    Furthermore, communication is critical when providing discounts, as customers need to perceive the value of the discount. Standard pricing should be transparently presented, and the rationale behind the discount should be explained, along with any specific requirements or commitments associated with it. Keeping the discount level confidential from third parties can reinforce its uniqueness, especially in the enterprise segment.

    In summary, the article underscores the strategic use of discounts in sales, emphasizing the need for clear goals, selectiveness, effective communication, and avoiding excessive discounting to maintain a strong market position and profitability.


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