Your sales team discounts to win the deal

What is changing

Procurement teams are better trained and better informed than they were ten years ago. They compare invoice prices across suppliers, anchor low and wait for the next concession.

Cost increases have pushed list prices up, so the gap between list and what customers pay has widened. Sales teams fill that gap with discretion.

Common signs

• Reps give their full discount authority on almost every quote, whatever the deal size.
• Overrides are routine, and nobody reviews who approved them or why.
• Customers ask for 'your best price' and get it, without giving anything back.
• Two customers of the same size pay very different prices for the same product.
• Gross margin looks fine at list price and erodes by the time it reaches the invoice.
• Stock-outs and long lead times are settled with a price concession.
• A refused discount is assumed to cost the customer.

Where it leads if left alone

Left alone, discounting becomes the way the business sells. Customers learn that the first price is an opening offer, and reps who hold price lose deals to colleagues who don't. Margin falls each year, even in years when volume grows.

The decision that is hard to reverse

A discount given to a key account is the hardest step to reverse. A return to the old price is treated as a price rise, and the discount spreads to other accounts that hear about it.

What recovery costs

Recovering an entrenched discount culture means re-pricing accounts one renewal at a time, retraining the sales team and rebuilding approval rules. The work runs across two or three annual negotiation cycles, and margin keeps leaking while it happens.

What good looks like

• Each segment has a floor, target and ceiling price, and the quoting system knows them.
• Discounts below target need an approver, and each one is traded for volume, term, payment or mix.
• Reps know what a discount costs and plan each key negotiation on one page.
• Monthly reporting shows who discounted, how deep and why.

What it is worth

Discount control changes decisions that are already being made every day, so its effect appears early.

Source: Pricing Insight worked example.

How it is treated

1. Map the discounts. Map every price paid against the typical price for the same product and customer size, and find where discounts sit by rep, branch and account. Strategic EBIT Opportunity & Risk Diagnostic →
2. Set a corridor and approval rules. A floor, target and ceiling price for each segment, and a one-page discount authority matrix built into the quoting system. Value-Based Culture & Transformation →
3. Teach the team to trade concessions. Give-get rules, a one-page negotiation plan for key accounts, and the maths of what each discount costs. Negotiation Training & Value-Based Selling →

How Pricing Insight works

Relevant work: at Hyster-Yale Asia Pacific, EBIT moved from a A$100k loss to a A$3m gain within 12 months as discounting was brought under control (realised).

Experience

Ron Wood has worked in pricing for 30 years: first as a pricing and commercial manager in FMCG, building materials and capital equipment, and since 2007 as adviser to more than 160 businesses.

Method

Each engagement follows the same sequence: diagnose, optimise, embed. Recommendations rest on the client's own transaction data, and every figure can be traced to it.

Measurement

Results are measured against a margin baseline agreed with the client's finance team, and reported as realised, modelled or identified.

Continuity

Ron Wood leads each engagement from the first meeting to handover.

Do you know how much margin was given away in discounts last year, and who approved it?

A first conversation establishes how this applies in your business and whether a diagnostic is warranted.

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