Discounting is a ubiquitous strategy in B2B sales, often seen as a straightforward way to close deals faster or gain a competitive edge. But is more discounting always beneficial? When viewed through the lenses of sales, finance, customers, and product P&L owners, the story becomes much more complex. While discounts can drive short-term wins, they often come with hidden costs that can distort revenue targets, undermine long-term profitability and may impact customer perception about your products.
For sales teams, discounts are often seen as a lever to accelerate deal velocity and meet quarterly quotas. However, unchecked discounting can lead to a "race to the bottom," eroding the perceived value of products and setting dangerous precedents with customers. Furthermore, excessive reliance on discounts can mask underlying issues in sales processes or product positioning.
From a finance perspective, discounts directly impact revenue and margin goals. While sales teams may focus on bookings, finance teams are concerned with reportable revenue adjustments under financial accounting standards (ASC606) and its alignment with overall financial health. Excessive discounting can lead to misaligned revenue allocations and jeopardize margin targets, creating friction between sales and finance.
Customers often interpret discounts as indicators of product value. Frequent or steep discounts can ultimately erode trust, leading customers to question the initial pricing. Moreover, over-discounting risks creating an expectation of perpetual price cuts, making it harder to maintain price integrity over time.
For product managers and P&L owners, discounts can distort profitability calculations. Aggressive discounting can skew the perceived success of a product, impacting future investments and product lifecycle strategies. It also places pressure on maintaining competitive pricing while covering fixed and variable costs. In complex offerings that include multiple product or service lines, uneven discounts adversely affect every product's P&L.
Unchecked or "rogue" discounts, especially those given outside strategy-driven limits, can have far-reaching consequences. To mitigate these risks, organizations should consider:
Discounting often creates a ripple effect that distorts key revenue metrics:
To use discounts effectively, organizations need a balanced approach:
Experience the power of innovation firsthand and discover how our solutions can revolutionize your revenue processes. Schedule a personalized demo now to see our advanced products and cloud-based platform in action.
...or contact us via information bellow
.svg){kind=icon}
