How to stop discounting without losing deals

Ask a sales team why they gave a discount and most will say the deal needed it. The numbers usually tell a different story: discounts bunch up at the end of the quarter, they grow with the size of the deal, and the customers who got the biggest ones renew at the same rate as everyone else.

Find out where the discounts go

Pull every deal from the last twelve months with its list price, final price and the person who closed it. Sort by discount. In most companies a few salespeople and a few deal types account for most of the money given away.

Set a range, not a ban

Banning discounts rarely works. Give the team a range they can use without asking, a second range that needs a manager and a ceiling nobody can pass. Write down what the customer gives in return at each step, such as a longer contract, a case study or payment up front.

• Up to 5%: the salesperson decides.

• 5% to 15%: a manager approves, with the reason in writing.

• Above 15%: a partner signs off, and it almost never happens.

Pay for price, not only volume

If commission depends only on revenue, a discount costs the salesperson very little. Tie a small part of it to deals closed at or near list price. Even a modest change shifts how people negotiate.

Show the numbers every month

Share the average discount by team and by salesperson once a month. Most people bring their numbers into line once they can see them next to their colleagues’.