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Estd 4.22.2023
Based on the guidance in our pricing strategy book Price to Scale, the answer is that while sales reps generally do have some flexibility to offer discounts to close deals, that flexibility is typically structured by customer segment and paired with clear guardrails to protect margins.
Below are key points drawn from our book:
• For different customer segments the book suggests specific discount ranges:
– Commercial deals may see discounts in the range of 10–30%
– Mid-sized deals might be discounted between 20–50%
– Enterprise deals could have discounts of 30–70%
• To ensure margin protection, it’s important to integrate these discount ranges into a pricing model that includes built-in price buffers. Essentially, you adjust list prices upward to create a “positive discounting range” for smaller deals before any discount is applied.
• Additionally, our book recommends instating a tiered or escalating approval process for discounting. Rather than giving ultimate discretion to all sales reps, you set defined approval limits that move up to sales managers and leadership as the discount depth increases. This ensures that the ability to offer deeper discounts is carefully controlled and justified within an established framework.
In summary, while your sales team does have the flexibility to offer discounts, those discounts should be predetermined by customer size/segment and protected by escalation protocols and price buffering strategies to ensure both competitiveness and healthy margins. This structured approach not only provides the reps with clear guidelines but also safeguards your revenue goals.