Avoid The 6 Risks of Discounts and What to Do Instead | APEX Leak

Discounts often seem like a quick fix to close a deal but come at a cost. They might win you the sale today at the expense of your credibility, margins, and long-term customer relationships. Worse, discounts can send the wrong message about the value of your product and your confidence in it.

Instead of relying on discounts, you can adopt smarter negotiation tactics that protect your pricing while meeting customer needs.

In this article, we’ll explore why discounts can hurt your business and how to negotiate effectively without compromising value.

The 6 Risks of Discounts

1. Undermines Your Credibility

When you’ve spent weeks or even months explaining to a customer the unique value your product offers and justifying its price, slashing it undermines everything you’ve communicated. It sends the message that perhaps your product isn’t worth as much as you claimed.

2. Devalues Your Product

Offering a discount instantly lowers the perceived value of your product. Customers may start to view it as something that wasn’t worth the original price in the first place.

And no, the discount percentage won't play any role.

3. Signals Desperation

Discounting can make it look like you need the deal too badly. This often encourages customers to push for even more concessions, putting you in an even weaker position.

4. Makes Upselling Difficult

Once a customer has received a significant discount, it’s extremely difficult to transition them back to paying the full price. This is especially true in long-term contracts, like SaaS, where discounts can erode margins over time.

5. Increases the Risk of Churn

If you later try to enforce standard pricing after a customer has gotten used to paying less, it can lead to frustration and increased churn. Customers who feel they’re being overcharged are less likely to renew.

6. Creates Inequity

Offering different discounts to different customers can lead to perceptions of unfairness, especially if customers discover others are paying less. This can damage your relationships with existing clients and harm your reputation.

So...It’s clear that discounts can cause more harm than good. So, how can you negotiate effectively without resorting to them? Let’s break it down.

How to Negotiate Without Offering Discounts

Step 1: Prepare Thoroughly

Preparation is half the battle in any negotiation. Start by:

• Listing Your Contributions: Document every concession or benefit you’ve provided during sales. This could be free product trials (if you have a software product), extra support, or flexibility on timelines. By showing what you’ve already offered, you strengthen your position.
• Understanding Your Boundaries: Know the limits of what you can offer and evaluate the customer’s importance internally.
• Anticipating Scenarios: Run through potential objections or demands to avoid being caught off guard during the negotiation.

Step 2: Take the Lead in Negotiations

• Gather All Requests in Advance: Ask customers to share their priorities and negotiation points before the meeting. If that’s impossible, begin the discussion by asking for all their concerns. This allows you to see the full picture and plan your approach.
• Avoid Compromises: Compromises often leave both parties dissatisfied. Instead, handle each point individually and aim for a clear win for either side.

In a compromise, each side sacrifices something they truly desire, resulting in a situation where no one fully achieves their goals. At APEX, we advocate for seeking win-win solutions that satisfy the core interests of all parties, rather than settling for compromises that may leave everyone dissatisfied.

Step 3: Use Contract Terms as Leverage

Instead of giving discounts, adjust contract terms to meet the customer’s needs without lowering prices. Examples include:

• Shortening payment terms.
• Including automatic inflation adjustments for longer contracts.
• Gaining logo or reference rights for marketing purposes.

These options allow you to provide value without sacrificing your margins.

Step 4: Question Customer Demands

When a customer makes a demand, don’t agree immediately. Instead, ask why they’re asking for it. Understanding their motivations can help you find alternative solutions.

For example, if the customer requests a discount because of budget constraints, offer flexible payment terms instead.

Step 5: Push Back on Discounts

When a customer asks for a discount, don’t hesitate to challenge them. Ask directly, “Why do you need a discount?” Then, stay silent and let them explain. Their response will often reveal whether their request is negotiable or if they’re testing your limits.

If they provide valid reasoning, look for ways to trade value rather than lowering prices. For instance, a customer might agree to act as a reference client or commit to a larger contract in exchange for certain concessions.

Discounts are rarely the solution to closing a deal.

They risk devaluing your product, damaging your credibility, and creating long-term issues in your customer relationships.

Instead, focus on showcasing your product’s value, preparing thoroughly for negotiations, and leveraging creative solutions like contract terms to meet customer needs. By sticking to your pricing strategy, you’ll build trust, protect your margins, and secure stronger, more sustainable deals.