Discount is apparently the gateway to the finalisation of a sales order. Customers after raising so many objections and getting satisfied on the same due to resolutions from the salesperson has this final objection which stands like a mountain in front of every salesperson. Salesperson’s often wonder as to why a typical customer asks for discounts even after fully satisfying themselves that they are buying the best possible option for themselves.
1. Wants Best Product at Best Deal
Customers are not only interested to buy the best product. They are happy to buy the best product at the best possible deal. This means that the buying decision is “optimised” around two variables i.e. Product and Deal.
Does this mean that the customer is ready to change his buying decision due to the deal? Or Does it mean that the customer is able to delay his buying decision for a particular product till they get the best deal for it?
Best deal is a perception or reality. Now this is where the salesperson comes in with his closing and negotiation skills on the table. The salesperson has to highlight the risks at the customer’s end which is going to be mitigated by your product or service. The opportunity loss due to the inherent risk should be much more than the factual cost that the customer is to pay for your product or service. If this happens, the deal gets upgraded to a “good deal” in the minds of the customers.
Now you favourably compare your “good deal” with other “good deals” in the market and should be able to visibly show to the customer that your deal is the best amongst all available. This is the point where he decides to buy your product or service.
2. Wants last pound of your flesh!
In my 38 years of hands on career in Sales, I have seen that customers keep on seeking more discounts even when they are fully convinced with the fact that they are buying the best possible product at the best possible price with the best possible terms and conditions. Why is it so?
Is the customer illogical? Is the customer inhuman? Is the customer heartless?
Not actually! The customer is just trying to understand if there is anything more that he can get as part of the deal in their last ditch effort. The customer actually is playing his role pretty well. It is the salesperson who falls prey to this and keeps in giving their flesh, sometimes at the cost of their own bottomline.
It is important for the salesperson to realise that he has done his work well. The customer is fully satisfied and decided. This is the time to just keep a straight face and follow this rule:
Buyer : What more discount can you offer?
Seller: The current deal is covering a risk of Rs X for you. This is my last price to you!
3. Want to settle for less to get more
Customers, sometimes , are ready to go for a lesser version of the product for a better price. Sometimes, they come in less preferred times like “Pitrapaksh” and seek a discount. Sometimes they will go for a “B” grade and seek the price of “D” grade of product. The picture above shows multiple dimension of customer’s mindset.
This tactics is employed by customers to bring the price down. Finally at the time of decision making they will finally go for the “A” grade only. By this time , they have foxed the salesperson into reducing the price of “B” grade so much that they now seek commensurate discounts for the “A” grade as well!
4. Cost of Loyalty
Customers who are loyal to you will always tell you every time they come back to you for making a purchase that they should get some extra discount on count of their loyalty.
Sellers who do not have a standard Loyalty program in place end up sharing their profits with such customers. It is advised that all sellers should have a standard thought of customer loyalty program which gives a high perceptible value to the customer but actually has a low factual cost.
5. Discount for Forward Buying
Whenever the customer takes a position for forward buying of goods and services, he seeks a discount. (When a seller takes a forward position on his own he also charges a premium to cover the risk of forward position).
The moot question here is “How much discount is good discount if a customer is willing to take a forward position?” The answer purely lies in the payment terms and conditions. Taking a forward position is valid only if the customer pays for the same today. If this is true, a discount equivalent to the cost of capital per month can be given to the customer. If the customer pays an advance of Rs X for a forward deal which is worth Rs Y, the seller can give a discount of cost of capital of Rs X for the tenure of forward buying. Nevertheless he needs to offset this discount with the risk of Rs (X-Y) which he is carrying forward for the customer.
6. Seeks customisation to downgrade your product
Customer’s are sometimes known to ask for a downgrade version of your product and on this pretext ask a discount to cover the extent of downgrade. e.g. a customer asks for a study table which is one feet smaller than the standard size manufactured by you. The seller at this juncture has to look for the opportunity cost of customisation and offset the same against the decrease in material cost due to the downgrading of the version.
7. Bulk Discount
Customer’s who buy in bulk often seek a discount for the same. They may buy in bulk by pooling in the demand of multiple customers or due to sudden surge in consumption pattern of the customer.
On these occasions , the seller must calculate the incremental amount of net receipt against liquidation of goods and services. The cost of capital of the incremental net receipt is what the customer gets in advance and the seller should consider this while deciding on the valid discount that should be given.
8. Post Event Discount
Customer’s who buy product or services on credit sometimes will seek discount on account of non fulfilment or part fulfilment of the services rendered by the seller. This is a Catch 22 situation for the seller. To avoid falling in this trap the expectation matrix of buyer and seller must be explicitly shared and consented upon.
9. My budget does not allow
There are many customers who like the product and maybe the price but surrender before the seller on the pretext that they do not have budget.
How much should the seller consider for the budget of the buyer?
My personal take on this is that if you are able to exhibit to the customer that you have covered the risk of the customer with a financial gain, you are not expected to show any further consideration.
There are few occasions , as follows, where a seller can show consideration for the customer’s budget:
- coveted order which can be flaunted for future marketing of seller
- if the order serves a social cause and the seller can afford the same
- if the cost of not selling is more than the cost of selling
- if the potential to get more referral sales through a particular order is high
- if the seller is confident about cross selling opportunity with the same customer and feels that the losses can be covered by the time cross selling is achieved
- if the seller is sitting on perishable goods and is constrained to liquidate the same in a given period of time
- seller wants to seek the blessings of the buyer for a cause which the seller resonates with
10. Repeat Business discount
When the customer comes for repeat purchase from a given seller , he often stakes his claim for more discount purely by virtue of the fact that he returned to the given seller for purchasing his product.
Can we call this customer loyalty?
We can call this customer loyalty only if the frequency of return is regular and follows a pattern which can be forecasted. If not, this is pure arm twisting. As a seller, one must stick to the quality and service norms. Discounts must be given by increasing the levels of service rather than decreasing the price.
In a nut shell
It is the birthright of the customer to ask for discount. It is also the karma of the seller to listen to the customer and take his own informed decision on the nature and quantum of discount that the latter would like to offer. Fall in love with your work and the quality of service that you wish to render to your customers. Do not fall in love with the customer’s request to ask for discounts. Customer is doing his duty by asking the seller for discount. Seller will do his karma by highlighting the risk which their product or service mitigates for the customer.