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Avoid The Discount Trap! - Focus on how your products and services will deliver VALUE

Understand the crucial differences between value, price and discounts to achieve required profits - 3 October

Hello Subscriber,

In today’s email, we’ll look at two huge topics that have an impact on profit.

  1. Discounts - The impact of discounts on profit.

  2. Focus on Value - The best thing you can do to ensure that pricing is not an issue for your customers.

1 - The impact of discounts on profit

A lot of people in sales roles are insufficiently aware of the potentially HUGE impact of discounts on profit.

Here’s an example based on a company making an average 10% profit.

  • What you’re selling is normally priced at 100.

  • Your fixed and variable costs are 40 and 50.

  • If you sell at 100, your profit is 10.

  • In this situation, what happens to your profit if you give your customer a 5% discount?

If you give your customer just a 5% discount, YOU CUT YOUR PROFIT IN HALF!

If a salesperson agrees to this discount, their customer gets a small reduction in price. And your company gets a HUGE reduction in profit. You’d need to sell twice as much at this level of discount, simply to make your normal level of profit!

Focus on Value

So how can you avoid giving away discounts?

When you work with your customers to develop the greatest possible value that will come from using your products and services, the price becomes less and less relevant.

Your goal must be to coach your customers to develop the fullest possible understanding of all the ways that your products and services will bring value to them.

Then, your customers will see your fair pricing from the perspective of all of the value they are going to achieve. You won’t get caught up in the trap of discounting that can fatally undermine profitability.

Here’s one area of practice to emphasise today

Coach your customers to develop the fullest possible understanding of all the ways that your products and services will bring value to them to avoid the trap of discounts.

Coaching Focus

  1. Review some recent situations with customers where they asked for discounts. How did the conversations develop? What more could you have done to focus on value?

  2. Role-play the meetings you have on your calendar for this week. How can you focus on value to balance the prices you’re seeking?

If you have questions or comments, it would be great to hear from you. Just hit reply and send me an email.

Have a great day!

Founder & Leader

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