Insights · Marketing and Sales
Why does discounting seem like the easiest solution?
Discounting is visible, easy to explain and may produce a short-term sales response, which is why it often becomes the default reaction when orders decline. Yet the improvement in volume may come at the expense of contribution margin, create new customer expectations and damage positioning. Before cutting prices, identify which customers perceive real value and where the sales process is losing opportunities.
Discounts can be justified for inventory, strategic access or a time-limited promotion, but should be assessed against the margin surrendered and the additional volume required. Start by analysing the product, the customer's problem and the economics of each order rather than assuming that the lowest price is the best sales argument.
1. Understand the difference between revenue and margin
Take a product sold for €100 excluding VAT with a €60 variable cost. Its unit contribution is €40. A reduction to €90 cuts contribution to €30, a 25% reduction. To obtain the previous €400 of contribution from ten units, the business would now need to sell approximately fourteen units rather than ten. Always quantify the additional volume required to recover the lost margin.
At an initial selling price of €100 and variable cost of €60, contribution is €40 per unit. A reduction to €90 cuts that contribution to €30. To generate the same €4,000 of contribution as 100 units at the initial price, the company would need to sell approximately 134 units, assuming unchanged costs and no capacity constraints: about 34% more units. This illustrative calculation does not mean every promotion is wrong. It shows why expected volume, promotional costs and perceived value must be tested.
A €10 reduction from a €100 initial price is a 10% discount, but with €60 in variable costs the unit contribution drops from €40 to €30, a 25% reduction. Approximately 134 rather than 100 units would be needed to match the original €4,000 of contribution.
2. Target customers who value different benefits
Customers do not all value the same benefits. Some prioritise initial price; others care more about reliability, technical advice, response time or total lifetime cost. Use interviews, sales history and support enquiries to segment buyers by the problems they need solved. Focus the offer on the groups where its advantages are economically relevant.
Segment customers by sector, size, use case, buying reasons, purchase frequency, profitability and demonstrated price sensitivity. Focus messages and service on the customers for whom the offer solves a significant problem. Segmentation should adapt commercial resources to different needs; it should not imply that every customer needs a premium product or that a premium offer must be discounted for every lead.
3. Demonstrate value before discussing price
Demonstrate outcomes before discussing price. A technical feature should be connected to a business effect: fewer production stoppages, shorter processing time, lower waste or more predictable service. Use demonstrations, transparent service conditions and verifiable examples; avoid vague claims that cannot be supported by the actual operation.
A software company that automates order processing can demonstrate which steps disappear, which systems integrate and how many hours are saved in a representative test. Estimated benefits must not become unverified guarantees. Salespeople should first ask which customer problem is costly, what happens if it remains unresolved, how purchases are authorised and what implementation and switching costs exist.
4. Enhance the offer without devaluing the product
An alternative to a blanket discount is to strengthen selected elements of the offer with a high perceived value and a manageable cost, such as onboarding, basic training, clearer service terms or a well-designed maintenance plan. Evaluate the contribution impact of these additions and avoid promising services the team cannot deliver.
Different service packages can make value easier to compare: an essential tier covers the basic need, a middle tier adds support, and an advanced tier offers greater functionality or responsiveness. Define scope and delivery boundaries transparently. Unlimited extra work can have the same financial effect as a price discount, so bundles should be costed before being offered.
5. Improve conversion throughout the sales process
Sometimes the business has enough enquiries but too few customers progress from one stage to the next. Examine response speed, opportunity qualification, the relevance of proposals, objection handling and follow-up. Distinguish a lack of leads from a conversion problem before investing in more advertising or lowering prices.
For 200 qualified opportunities, a 20% close rate produces 40 sales; increasing conversion to 25% yields 50 sales, 25% more contracts at the same average deal value. This is arithmetic, not a forecast. Test improvements separately—clearer proposals, structured discovery calls, objection tracking or systematic follow-up—and compare like-for-like periods using stable definitions.
6. Grow existing accounts without undermining relationships
Existing customers may have additional needs, but the relationship should not become a constant upselling exercise. Understand their situation, review actual usage, recommend compatible services only where they solve a problem and measure retention and satisfaction alongside additional revenue.
Cross-selling should meet a real customer need. A necessary accessory that makes existing equipment work correctly may be valuable; an irrelevant add-on risks damaging trust. Track retention, satisfaction, complaints, cancellations and service cost as well as average order value. More revenue per customer is not beneficial when it creates disproportionate support costs.
7. Train negotiation skills and set discount rules
Set clear authority levels and conditions for discounts. Sales teams should understand the financial effect of each concession and be able to negotiate value, scope, quantities or payment terms. An exception should have a documented reason and ideally a commercial counterpart rather than becoming the standard price.
When a customer objects to price, explore why and compare a smaller scope, phased implementation or a different service level before conceding. Record discounts and assess their economic impact. Teams need to discuss margins and customer value as well as turnover. Sometimes declining a commercially unviable opportunity is the more sustainable decision.
8. Measure growth alongside profitability
Track growth through revenue, average selling price, conversion, frequency, customer retention and contribution margin. Compare net results by segment, not only the headline sales figure. A plan to increase sales without reducing prices succeeds only if it generates value that customers recognise and the business can deliver profitably.
Higher volume may require extra delivery hours, commissions, acquisition spending and operational capacity. The objective is a sustainable relationship between the value delivered, price and cost to serve, not indiscriminate price increases. A differentiated offer begins with evidence of the problem it solves, for which customers, and with what measurable benefit.