People have been posing this situation for years and here is my perspective: Lowering your price and expecting to close more sales is a strategy you should use only under extreme circumstances.
Below are questions that will get you thinking about whether it is right for you:
1. Am I taking a discount to match a competitor’s price? What leads me to believe the competitor with a lower price will not simply lower their price even more?
2. If this is a new customer, how do I expect to ever get the price up to the full amount if I’ve now sold it to them at a discount?
3. If this is an existing customer and I offer a discount, will they think I’ve been overcharging them up to now? If so, will that damage our level of trust?
4. Is the customer who is asking for a lower price simply one who will buy from anyone as long as they’re the cheapest?
5. Is the customer I’m going to give a discount to been one who has been difficult to sell to up to now? If so, then what makes me believe they’re not always going to be a high-maintenance customer?
6. How will other customers respond when they find out this customer received a lower price? Will I wind up having to give a discount to a number of customers?
7. Why is the customer asking for a lower price? What did I not do properly in the sales process to get them to understand the benefits and outcomes of what I’m selling?
8. How do I know the customer won’t buy from me even if I refuse to give them a discount?
Taking a discount to close a sale is anything but a quick decision. The questions above are designed to do one thing — get you to slow down and think carefully before even entertaining the idea of offering a price reduction.
Copyright 2013, Mark Hunter “The Sales Hunter.” Sales Motivation Blog.
I agree that reactionary discounting is counter productive for all the reasons given. I’d add, “Is this customer cherry-picking me for a few items which I’m most willing to discount, while denying me the opportunity to achieve a fair profit across a broader portfolio of items they purchase?”
A creative antidote to the request for a discount is to have a list of desirable customer behaviors for which you will ‘exchange’ price. For example, aggregating small orders up to a single large order; agreeing to net-15 instead of net-45 payment terms; or ordering through your web-channel vs. your call center. These can allow the seller to turn the tables a bit and put the choice back on the buyer, saying “Mr. Customer, if I give you a discount of X%, will you do Y-behavior for me?” If you know what behaviors you prefer and what they are worth, then you won’t often lose by proposing such options. If the prospect walks, then it was their refusal to negotiate and not yours.