Paul shares five reasons why you should never disclose discount percentages.
The short answer to the question is… “without a shred of doubt, 100%, absolutely not.” There is no conceivable reason to reveal a discounting percentage on a proposal.
There are five reasons why you should not reveal this information to the buyer.
Showing a discount establishes an expectation of future discounts and concessions.
Showing a discount percentage indicates pricing flexibility. Let the negotiating games begin.
Showing a discount percentage will give the buyer a comparison tool. Buyers will take that information and use it against you.
Discounting cheapens your image. It’s as simple as that.
Any discount off a list price is fugazi!
“Instead, use these three words…”
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Should I include discount percentages on proposals?
(Transcribed from podcast)
On today’s episode, we have a question that came from a recent virtual training seminar. I was working with a group of salespeople. They’re selling, let’s call it, capital-type of equipment. So they’re selling anywhere from half million to several million dollar pieces of equipment. The salesperson wanted to know about pricing. See, in our presentation, we were talking about how to present your price, and the salesperson asked, “Should I include a discount percentage on the proposal?” Think about this for a moment. You present the customer with a list price then you say to them, “Okay. You will get 20 percent off of the list price.” The salesperson wants to know, “Should we take that 20 percent and put it on the proposal and mention it to the customer?” So that’s the question we’re going to get into today. Should I include discount percentages on my proposal?
Before we get started, let’s give a quick shout-out to our sponsor, Andrea, and The Creative Impostor Studios. They do a wonderful job. I know that podcasting continues to grow, and this podcast continues to grow. We are now in over 50 countries. And a lot of the reason why is because of Andrea and her team. They do a wonderful job helping to tweak the show, make it better; improve it. If you’re thinking about starting a podcast, if you want to connect with your audience, reach out to her team. They are amazing.
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So, with that being said, let’s get back into this question: Should I include discount percentages on proposals? And I can tell you without any shred of doubt, 100 percent, absolutely not. Never include your discount percentages on the proposal. And I’m going to explain why, but just never do it. It’s not a good idea. I get it that your pricing might change. The discount percentage might bring some value, you think, to the customer. Just don’t do it. Absolutely not.
Here’s why. Number one: you don’t want to set an expectation in the buyer’s mind. Whatever discount percentage you are giving this customer off of list price, they’re going to begin to expect that for everything. Whether it’s going to be on their labor bills, whether it’s going to be on a repair bill, whether it’s on shipping costs, whether it’s on repair parts, whether it’s on a new piece of equipment, they are now going to have an expectation in their mind of future discounting. You’re setting a precedent of discounting. Why would you want to begin a relationship like that with your customer? Why would you want to tell them, “Hey, here’s the list price and here’s what I’m going to discount”? You don’t want to set that expectation.
Another reason you don’t want to include the discount percentage, this shows that you are flexible from the very beginning. And that’s what we’re trying to avoid. When you are presenting your solution, think about this. You’ve, taken all this time, all this energy and effort, and you’ve created a solution for this customer. Now you’re getting ready to talk price. Now is when we really get into that negotiation, and you want to show no flexibility. Well, by showing the buyer a discount percentage right off the bat, you are showing them that you are flexible. Any buyer’s going to see this, and they’re going to look at that discount percentage, and they’re going to say things like, “Well, I think we deserve a bigger discount,” or, “You know what? We need to see your discount percentages for your top customers, and we want to be the same.” They’re going to use that as a negotiating tool against you. You don’t want to put that discount percentage on there, because it shows flexibility.
Another thing to consider, your buyers can now use this information as a comparison tool with your competition. I can almost guarantee you that your customer is going to take this discount percentage, they’re going to look at the other proposals or the other options that they are considering, and they’re going to see if they offer a similar discount. They’re going to wonder, “What’s this competitor’s price? Does it match up with this type of discount percentage? They’re going to use the numbers against you to try to gain a bigger discount. Again, we don’t want to do this. We don’t want to give our buyers additional information that they can use as a comparison tool.
Another thing to think about… It’s a fake number anyway. Let’s be real about this. And when I say fake number, I’m referring to list price. Don’t even include your list price. Don’t include the discount percentage. None of that matters. It does not matter because what the buyer’s going to be concerned about is the bottom-line price—what they’re actually going to pay. And all the other things that you put on there is just a distraction. It doesn’t bring any value. In fact, it detracts from the value that you provide, because if you’re providing enough value for the customer, if you are aligned with how they do define value, you don’t need to offer a discount. You don’t need to try to trick them into thinking that they’re getting a better deal than they already are. Because they get to experience your value-added solution, that’s all the deal that they really need. So again, we don’t want to show that number. It’s just fake. And those are some of the tricks that other sellers will use to try to make the buyer think they’re getting a better deal.
And then one last thing to consider, whenever you think about a discounted item or a discounted product, or you pass a clearance aisle and there’s a discount that you can see that’s visible, or you’re given a discount for buying product X when you buy product Y. Whenever you are given a discount to purchase an item, it cheapens the image of that product. That’s right. You have to remember, pricing builds perceived value. The more something costs, the higher the price, typically we associate that with better quality and better performance. When you show the buyer that you are discounting that price, they can also assume that you’re discounting the value in some way. Because a discounted product, it cheapens the image. And you think about all the money that companies will spend on their solution, on promoting it. They get the look and the feel of it, trying to enhance the quality and the image of it. It now is cheapened every time we offer a discount with it. Keep that in mind when you are presenting your price.
And never ever, under any circumstances, should you put the discount percentage on the proposal. So there is one tip, when you are presenting your price, remember these three words, the-price-is. It’s simple. It’s easy. It’s competent. It shows no wavering. When you are presenting that price, the buyer’s going to be eager to hear what you have to say. They’re going to be on the edge of their seat. They can’t wait to hear it. Just look them right in the eye: “The price is…” That’s how you show there’s no wavering.
Make it a big day.