To cultivate discount awareness and discipline, managers should start by asking themselves the following questions:
- Are discount dollars being invested in the customer segments and product categories that provide the greatest strategic value to the company? For that to be so, discount guidelines for each segment and category need to be established in advance of negotiations.
- Do discount levels associated with a particular customer segment or product category vary widely, beyond what can be attributed to differences in deal size? If so, guidelines for determining discount size need to be set and enforced, and additional sales training may be appropriate.
- Are discounts fairly consistent over time, or do they rise sharply at the end of the quarter? Higher discounts at quarter’s end are expected, as the sales team strives to hit targets. If these spikes are excessive, though, sales incentives may need to change, so that reps are rewarded for keeping their discounts in line.
- Is excessive discounting a widespread, relatively uniform problem in the company? Such a pattern calls for a broad review of discount policies and a fresh look at price lists, which could require downward adjustment.
A Case for Discount Discipline
by Jim Geisman
Harvard Business Review
Subject: Marketing Questions