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Estd 4.22.2023
Based on the approach outlined in our pricing strategy book, Price to Scale, it’s best to have a standard discount policy in place—and not to rely solely on case-by-case negotiations. Here’s why and how you can implement it:
• Use a Discounting Matrix:
Our book emphasizes using well-defined guidelines, such as a Discounting Matrix, which lays out clear authority levels for different members of the sales team. This matrix helps ensure that every discount offered aligns with the pre-set limits and that all sales representatives adhere to consistent pricing practices. For example, our book suggests that various customer segments might follow different discount ranges (e.g., Commercial: 10–30%, Mid-sized: 20–50%, Enterprise: 30–70%).
• Avoid Inconsistent Practices:
Handling discount requests on a purely case-by-case basis can lead to “revenue leakage” as inconsistencies may arise across your sales team. Standard policies create a predictable framework that is easier to monitor and adjust. This not only helps prevent giving away too much value but also reinforces disciplined pricing across the organization.
• Flexibility Within Defined Boundaries:
While a standardized policy ensures consistency, it’s also important to incorporate some flexibility. As discussed in Price to Scale, if there are unique situations or strategic reasons to consider an exception, you can have alternate approaches—like offering an upgrade or bundling services in exchange for a discount—so long as these options are part of your approved framework and communicated clearly.
In summary, our book recommends establishing a standard discount policy with clearly defined ranges and discounting authority via tools like a Discounting Matrix. This policy provides consistency, protects revenue, and still allows for strategic flexibility when addressing customer needs.