A post from Jason Lemkin earlier this week got me thinking. The essence: Don’t over-discount when things get harder. It only makes things harder.
Without us realizing it, discounting sends a signal of desperation. That we don’t care about the prospect. That we don’t know how to add value (anymore). That there’s nothing left to discuss (anymore).
We might get away with this in good times, but not in a downward economy. And although discounting is a deliberate strategy for some vendors – for most, it’s a sign they’re stuck in a vicious cycle.
So the big question is: How to get out?
In all the projects I’ve done in the past five years, I’ve learned one thing: 99% of the time it’s not a sales execution problem. It’s a foundational problem. Your value foundation
Let me explain, The value foundation for any SaaS business consists of 3 pillars:
- Clarity who you’re for and not for
- Taking position – so you stand out
- An irresistible value proposition
Without a strong foundation, we just drop the problem on sales: ‘Just sell’ -right?
But….the fact you have to give discounts is not only harmful because it lowers your average deal value.
It signals a much bigger (and much more expensive) problem that negatively affects every department in your SaaS business, not just sales. Believe it or not – indirectly, it affects implementation, customer success, R&D, churn, gross margin, and valuation….
Fixing the foundation results in
- sales confidence and honesty.
- That drives trust on the customer side.
- That leads to accelerated deal cycles, high win rates, and increased deal sizes.
- And since you’re winning more of the right customers – that positively affects every department’s performance in your SaaS business.
Key takeaway: Fix your foundation so you can ban discounting from your vocabulary
Question for you to reflect upon
What’s the discounting behavior in your SaaS business – what signal does that give your prospects?
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