Sales proposals are somewhat limiting, especially to companies in highly competitive fields or those providing straightforward services, because oftentimes, buyers make their decisions based on one factor: price. If your price is lower than your competitors, you’ll win the bid, but if you’re higher, you won’t have a chance. This is frustrating at times, as you may offer a higher quality of service or better customer relationships, but an objective number may kick you out of the running.
Fortunately, you can use selective and creative discounts to make your prices more appealing—but at the same time you need to be careful. You can’t blindly slash your prices too far, or you won’t make any money on the deal, and if you don’t present your discounts properly, you could compromise their effectiveness.
Where Discounts Come Into Play
Discounts may seem like a straightforward addition of value to your proposal, but there are actually three ways they can increase your chances of closing a deal:
Objective value. The first is obvious, and especially important if you know you’re facing stiff competition. In some circles, the lowest-priced proposal is going to win the bid, so having an objectively lower price will increase your chances—regardless of what type of discount or how steep a discount you’re offering.
Perceived compromise. There’s also the perception that you’re offering a discount because of how much you value the potential relationship. If a buyer is choosing between two similarly priced competitors, and one is offering a more significant discount, the buyer may go with this option.
Negotiation and choice. Offering different types of discounts in your proposal also gives your prospective buyer a certain degree of freedom and choice. This can be valuable if your buyer has needs or wants that are undisclosed in the original RFP, or if your buyer likes to have wiggle room with various options.
Finding the Right Price
The first obstacle you’re going to face in deciding on a discount is how to set the right price. If you’re especially interested in a deal, you may want to cut your profit margins, but if you cut them too thin, you’ll end up doing yourself a disservice.
First, consider how badly you need this deal. Are you behind on your sales targets for the month, or are you sitting comfortably on a number of new clients? Generally, the more comfortable you are, the less of a discount you’ll need to offer, which is somewhat counter-intuitive, but it will secure you more deals when you need them the most.
Second, think about all the peripheral values that a deal may offer you. Assume for a moment that you only break even on a job. What other benefits are you going to see? Will this client offer you other, more profitable work in the future? Will this make for a good portfolio piece? Will the client be able to refer you to other, bigger clients? What can you gain from the relationship?
Finally, take a look at your competitors’ pricing models and see how much of a discount they’ve offered in the past (if you can). This should give you a solid indication of where to start. From there, you may consider cutting costs on some of your services or products if you can, to offer a lower price without cutting into your profit margins.
Offering Different Payment Options
Next, you’ll want to consider offering different payment options, which will allow you to offer different types of pricing for what are, essentially, the same products and services. For example:
Packaging services. You can take a number of different services and package them together differently, at different levels. For example, you might offer a “simple” plan and an “extended” plan against a “premium” plan.
Itemizing services (a-la-carte). You can also itemize all your products and services in a kind of a-la-carte menu, which your prospective buyers can use to build their own custom plan for their own desired price. This gives you more flexibility.
Monthly retainers. Monthly retainers forgo the costs of individual products and services in exchange for a blanket monthly rate that covers a specific range of services.
Discount Styles and Options
There are also a few styles and options of discounts you may find valuable for different situations:
Bulk purchases. Here, you’ll offer increasing discounts based on how many products or services the buyer orders.
Extended contracts. Similar to bulk purchases, this is more focused on time than quantity—the longer the terms of service extend, the lower your prices can go.
Stipulations or circumstantial discounts. You may also offer situational discounts, such as a discount in exchange for a new client referral or progressive discounts based on variables in the contract.
Key Tenets for Success
With those options explained, there are a handful of key principles you’ll need to be successful in your discount presentation:
Do your research. Before you can offer any discount, you need to know what you’re getting yourself into. Know your costs, know your buyer, and know your competition.
Keep it simple. You have a lot of options here, but try not to pack all of them into a single proposal. Your best option is usually to keep it simple.
Make it obvious. Show off your discounts however you can, making them prominent and obvious to even an oblivious buyer.
Focus on value. Play up the value of your discounts, showcasing their objective advantages.
With these tenets and considerations in mind, you can find and create the perfect discounts for each of your proposals. The last step is to make sure they’re displaying properly, and in a controllable, repeatable format; the best way to accomplish this is to use CPQ software, which puts your sales force on the same platform and enables you to meticulously control things like pricing and discounts.
If you’re interested in putting CPQ software to good use in your business, start with a demo of iQuoteXpress today!
