Designing Discounts: Turning a Profit on Reduced Price Sales.

Sales

Sales are an integral part of running a business, but passing on savings to your customers isn’t a straightforward process. In fact, too often businesses cave to unrealistic pricing expectations on the part of customers or in misguided attempts to keep up with the competition and find themselves over-reducing their prices. Make this mistake too often and you can crash your business’s budget, resulting in long-term debt.

The key to offering sales is to make sure your price cuts are set at an appropriate level relative to your product and services, but how can you arrive at that number?

By using iQuoteXpress’s CPQ software, you can guarantee that your pricing reflects financial realities while still offering your customers a great deal.

Before You Start: Review Past Sales

Review Sales

One of the best things about using CPQ software is that when you go to review your past sales, your records will be impeccable. Each proposal will look the same, any specific discounts will be clearly marked, and you’ll be able to easily compare each sale against the rest. Those numbers, when compared to internal costs, can help you clearly delineate the typical markup, the price and quantity where you break even, and your average profit margin.

Once you’ve established these values from past sales, you can then start to formulate your discounts. Leave yourself room between your break-even price and the point where you make a profit and make sure to run different scenarios. While we typically worry about companies cutting their prices too much during a sale, it’s common to see increased sales volume when you offer a discount.

With this in mind, recognize that sometimes offering a bigger discount will work in your favor. Increased sales volume can help make up the profit gap between two discounted prices, so don’t be afraid to drop your prices a degree further if you think that will boost your sales growth.

Understand Your Audience

Audience

For some companies, individual sales offer less information about overall financial prospects than calculating each customer’s lifetime value. The challenge with such a calculation, however, is that the predictive math fails to account for discounts and special offers provided along the way, as well as for the growth of the client in B2B scenarios. To determine the real value, you’ll need to perform a Discounted Cash Flow (DCF) analysis.

DCF analyses aren’t simple and they require some in-depth math, but don’t let that discourage you. You can follow along as David Skok breaks down the numbers, or take a look at his recommended discount rates for Software as a Service companies for a general sense of his conclusions. Even if you’re doing a radically different kind of business – selling gym equipment or modular homes, for example – his conclusions can help you understand why lifetime value calculations need to consider discounts.

Look At Your Options

Once you understand the general scale of your intended discounts, it’s time to consider the many ways you can present these to your clients. Your company might offer near equivalent discounts by packaging products in tiered plans, offering a la carte selections from your full catalog, or by offering discounts on bulk purchases, among other options.

No matter what route you choose, however, make sure you clearly mark off this discount in your sales proposal. You don’t want customers to perceive a temporary discount as a new standard price.

If you’re going to offer multiple potential discounts, CPQ software can help you speed up the proposal phase while also helping your customers determine which purchase plan benefits them most. All you need to do is compare the different sales configurations so your customer can see what’s on offer in each case. Being up front in this way also helps build trusting relationships with your clients. It shows you have their best interests at heart, even as you look to turn a profit.

Don’t forget to consider whether offering added value services such as instant chat support features, social media insights, or product demos to your sales packages might allow you to maintain your current pricing while making those offerings more appealing. The value of a product doesn’t lie only in the material goods, but also in features like the customer support your company offers.

Focus on Approvals

Discounts tend to attract clients in the pre-proposal phase; you advertise a deal and potential buyers drop in to see how they can save money. Using CPQ software during this phase is vital because you may find yourself generating proposals for sales that are unlikely to be completed. Still, it’s important not to focus on this possibility – instead, you need to focus on reaching the approval phase.

The beauty of offering a discount is that when you offer a quality product, customers initiate a relationship for the savings and stay for the service and experience. Great products sell themselves. All you have to do is make that first sale.

One way to capture customers during the approval sale is by offering a slightly lower discount during the proposal, then offer to increase that savings just slightly if the customer will sign a subscription, retainer, or commit to future sales in some additional way. The simple, multistep process that CPQ software facilitates allows you to confirm a profitable sale during those final steps, keeping you within budget while making your standard discounts appear even more attractive.

Turning a Profit the iQuoteXpress Way

CPQ software is what keeps the modern sales force moving, helping companies shape product combinations, generate proposals, and finalize sales more quickly than ever before. If you’re interested in seeing how iQuoteXpress’s revolutionary software can benefit your company, contact us today to set up a demonstration. We’re more than happy to walk you through our CPQ software.

Making the leap from promoting a discount to executing high volume sales can be a challenge, but it doesn’t have to be. By joining the iQuoteXpress family, you’ll see your profit margins grow overnight as the timeline from first contact to final sale shortens dramatically. You’ll never do business the same way again.

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