
Startup sales negotiations 101 – how to respond to discount inquiries - SteliE
http://blog.close.io/startup-negotiation-101-how-to-respond-to-discount-inquiries
======
gr2020
My general experience with people asking for discounts on our $30-50/mo
product is:

1\. Some people ask for a discount, saying they're going to be long-term
customers, they're going to blog about us all the time, and it's going to be
great. 95% of these end up not being long term customers, and do not end up
blogging about us all the time.

2\. Some ask for a discount, and say (or imply) they'll go elsewhere if they
don't get it. My thought is if a few bucks a month is the deciding factor,
it's going to be hard to retain them in any case.

3\. Some are polite about it, and just ask if there are any discounts
available. They're going to subscribe anyway, but wanted to make sure they're
not passing up a good deal.

I almost never offer one-off discounts any more, and very rarely offer any
kind of public discount offer (and it's always for a limited time when I do).
When someone asks I point them to our referral program, and to out partners
who may offer a bundle discount on our product if you subscribe to _their_
product.

The benefit to this approach, in my mind, is that no one ever feels like they
got ripped off because they had to pay full price - there aren't any public
discounts available, so pretty much everyone pays full price.

~~~
rmason
Jason Cohen proposes an interesting idea for customers asking for a discount:
give them two months free if they prepay for a year. He makes the case that if
you're a bootstrapper having the money all at once upfront is worth it.

[http://vimeo.com/74338272](http://vimeo.com/74338272)

~~~
gr2020
I watched that video recently. He raises a good point about the value of
having cash up front, but my worry there is the liability it creates. There is
a 1-year period when you might have to refund some or all of it, which is a
long time IMHO.

~~~
larrys
Prepay for a year doesn't imply that they will get money back if they cancel.
Unless of course that is the way you make the offer.

But even if there is a liability you have to calculate the percentage of
people that will want a refund. If it is "high" (whatever that is..) you have
a much bigger problem (people don't like your product or service).

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mathattack
My 2 cents... When asked for a discount pre-trial, I am vague suggesting
"We'll find a way to make it work for you. We can offer discounts for longer
term contracts. Once you do the trial, we can narrow down the scope and figure
out how to get it to make sense for you."

If they'll give a reasonable budget to hit, then we can find a way to make
trade-offs to hit it. If it's discount requests without either a budget to
hit, or an explicit competitor's price, then it's too early to make
concessions. You need the specific competitor so that you can define value
propositions. And if you ask for enough competitor pricing, then eventually
you'll get a sense of what the real price away from you is, and if the
prospect is giving you BS.

This is a tough topic, because on a business with 10% net margins, if you give
everyone a 10% price cut, you've given away all of your profits.

~~~
adwf
I was about to suggest much the same thing. Instead of offering a month trial
by default, only offer it when enterprise customers ask about billing. Then
you can use it as leverage, in the "Here! I'm giving you something!" sense,
rather than it just being an assumed perk. You've thus generated goodwill and
can follow up the trial with an offer for a bulk 12-24 month deal.

You can still offer free trials by default to lower tiered customers, eg.
consumers, small businesses etc. But they aren't the ones that you need to
worry about 10%+ discounts on. Becuase they're so low billing that the rarity
of the pre-trial discount will render the overall cost negligible.

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sandrae
It's my job to to create the quotes and offers for our SaaS software. The tip
in this article does not match with my personal experience.

This is something that happened to us some time ago: Someone phoned us asking
for an offer. We told him to try the software instead to see if the company
likes it. He said that he will do that.

A week later we followed up with him. He said that his boss, for whom he
collected the offers, had a meeting to which he wasn't even invited. In that
meeting, his boss and some other managers compared all the offers they
received. There was no offer from us because we told them to try the software
instead. According to the person on the phone, the managers just looked at the
printed quotes. They picked the three that seemed best to them and proceeded
with that short list.

Since that day we always send out a standard offer when someone asks for it.
Of course this quote is changed later if the company has needs that are
different from the standard.

Often the person collecting the offers is not the person trying the software,
but an intern who is pre-selecting for someone else.

If you don't want to be crossed out in that list the intern gives to the
manager as "didn't submit an offer", you need to submit something.

~~~
quicksilver03
Counterpoint: you don't necessarily want this kind of companies as customers,
the kind of manager who buys on a PowerPoint and Excel checklist is already on
CYA mode and is not looking to the value you provide.

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jusben1369
I'm not a big fan of this approach at all. Two reasons why:

i) Company is actively, publicly, positioning itself as a discounter "Check it
out and if you dig it I'm sure we can work something out" So now don't be
surprised when you get more requests for discounts! ii) At the end of the day
they're stating something they believe to be _not true_ We don't intend to
take care of you. We think you'll qualify out and if you stick around or
you'll like it so much you won't want a discount.

Why not just say "Hey, I tell you what. Sign up for a trial and if at the end
of that time you really want to buy it _and_ you have a good reason why you
shouldn't pay our actual price we'll listen to you." It's closer to what
you're really thinking.

~~~
thekevan
Isn't this the site where everyone is always saying you undervalue yourself
and should raise your prices?

I actively position myself as a discounter. I figure out what my price should
be, then I price higher than that. I discount down to halfway between the
advertised price and my "should be" price at the blink of an eye. I almost
always get higher than my "should be" price.

No one pays retail, they all think they are getting hooked up.

Any further price discussions end pretty easily with me starting with, "Well,
we've already given you a good discount..."

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adrr
I'll never negotiate on pre-defined tier pricing. On the "call us" for
pricing, i will negotiate. If you make me go through a sales guy, i am going
to play hardball.

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tlogan
For SaaS product with pricing, I always give discount if they ask for it
before doing trial. Why? These people _will not pay_ anyway. No need even to
waste time on telling them to sign up. Just try it and see.

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trjordan
Lots of deflection in this thread. Here's another idea:

"I'd be more than happy to give you a discount. I feel our pricing is fair, so
I don't do this frequently. If we can find a price you're comfortable with,
will you purchase the tool?"

Discounted pricing is normally the last step. So, if we're talking discounts,
you're about to buy, and it's not my call to steer you away from that. But,
let's be clear: if we're talking discounts, you're about to buy, and that
should be the tone of the conversation.

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jfasi
The author argues that nine out of ten bad customers will self select during
the trail period, but does not offer any indication for how to positively
verify that. Perhaps those asking for discounts are doing so not because they
are problem customers waiting to happen, but because your product is priced at
too high a price point?

Can anyone recommend a strategy for verifying that isn't the case, rather than
insisting that good customers will be happy to pay the price and damn the
doubters?

~~~
SteliE
The point I'm making is not that it's bad to ask for a discount. I do it all
the time :)

The only difference is I don't ask for discounts before trying a product and
determining that it fits my needs and I actually want to purchase.

The advice I give is to ask people politely to trial your product first and
then offer them a discount if they actually confirmed that they like it

~~~
reeses
If someone offers you money, take it. Smart salespeople shut up the instant
the prospective says,"yes."

~~~
SteliE
That's true for one time deals where you don't care about success but not true
for SaaS. Taking money from the wrong customers and running a high churn/high
support cost SaaS app will destroy your startup.

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ehm_may
Good post. So much this. If your pricing doesn't make sense, you will
eventually find out one way or another - but don't give out discounts solely
for the purpose of bringing in new customers. Especially if they are not
seeing the value of your product at its listed price point. This will just
lead to them wanting more. And I've often found that the users paying the
least ask for the most.

~~~
Pxtl
> And I've often found that the users paying the least ask for the most.

This is a universal truth. Any business where they tried to under-cut the
competition will have horror stories about their lowest-paying constantly-
dickering customers trying to squeeze every last ounce of use out of the
service or widget they under-bought.

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futurist
Disagree. If I ask for a discount, it's because 1) the pricing is off and you
have competition 2) I want to make a decision and settle into the service.

If you say no to my offer, cool. I'll go elsewhere.

I think startups that say no to reasonable discount offers are foolish, and
it's a bad omen for their future.

~~~
SteliE
Curious to hear if you really "want to settle into the service" without having
used/tested the product at all?

Asking for a discount during your trial is one thing, asking for a discount
before trying the product is another :)

~~~
futurist
I ask for discounts on yearly subscriptions, but I test the service first.
Sometimes I need only a day to know if it's a right fit or not.

~~~
btrautsc
Ironically, we're happy to give discount pricing for a year deal - because in
that case the customer is investing up front and we're confident once they're
using the product they'll realize significant ROI and stay.

But re negotiations, I agree with Steli here - the customer who asks for a
discount before they've ever tried the product will typically become a problem
customer (especially for a young company trying to get the initial 10-100
customers).

------
kayhi
Interesting to see different views on this topic

[https://signalvnoise.com/posts/2580-why-non-profit-
pricing](https://signalvnoise.com/posts/2580-why-non-profit-pricing)

Who decides who really needs a discount? We believe prices should be fair,
public, and consistent

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fenesiistvan
I spend 2 years from my life related to this topic. We are offering a
relatively high priced product and lots of Arabic customers whose habit is to
negotiate. After 2 years, spending half of all my days with negotiating, I
finally arrived to the conclusion that my time is much more valuable if I
invest it in something other such as product development and then I came up
with a price wizard: [http://www.mizu-
voip.com/VoIPhostingsetup.aspx](http://www.mizu-
voip.com/VoIPhostingsetup.aspx) Since this is online, I am not going anymore
into any conversation negotiation with our clients. "All our prices are fix
and we offer the same for all our customers"...this is my standard answer.

------
lylemckeany
This reminded me of Hipchat's 30-day free trial that I recently discovered. I
was mistakenly under the impression that they limited the trial to 5 users. I
reached out to them on Twitter, since I couldn't find an email address for
them anywhere, and they told me the trial can be for an unlimited amount of
users. I think this is genius. With a product like Hipchat, 30 days provides a
decent enough amount of time that companies will feel locked-in as long as
they use it a fair amount. Great strategy.

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loomio
Just to make a point on the other side: We are a bootstrapping social
enterprise startup and honestly have to penny pinch. When we were looking for
the right CRM, both One Page CRM and Nimble offered us discounts when we wrote
to them and asked politely.

We ended up sticking with Nimble due to the preferred workflows of the Sales
team, but I still regularly recommend both products to lots of other people,
some of whom have gone on to become paying customers for those services.

They are both great CRM tools, and because the people who run them were so
understanding and provided great service by understanding our genuine need for
a discount, I will be forever grateful and will recommend them. We've also
mentioned both on social media.

So that's the flipside - if you do give discounts now and then to those who
need it and are grateful, you'll earn a lot of loyalty. I think the answer is
to be human about it. Listen to people, give them the benefit of the doubt,
and decide things on a case by case basis.

------
vacri
It really depends on pricing. The more expensive the service, the more likely
there's negotiating fat explicitly build in. Two jobs ago, I was with a
company that sold medical equipment mostly in the 4-5 figure range. They had a
flat 5% discount that the sales guys _opened_ with.

Similarly, having just implemented ethernet-over-copper for our office, I got
to see more fat in action there. It's ridiculously expensive here in aus - I
got a 5% discount just by asking "is there a discount?", and our CFO finalised
the deal and got a 5% discount by asking the same question again. Neither of
us are hagglers - that fat is just built into the price.

On the other hand, if you're doing consumer-level stuff with many users,
individual discounts would likely be a headache and usually people hung up
over a once-off couple of dollars are more trouble than they're worth. Highly
contextual on target audience though, methinks.

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6cxs2hd6
> "Thanks for inquiring about pricing options! Why don't you sign up for a
> trial and give the product a go? If you find out that it's a great fit I'll
> take care of you and make sure you get a price that makes you happy. Sound
> fair enough?"

Me: "Yeah, so we did the trial and we really like what you're trying to do.
It's not a _perfect_ fit for us, yet -- we'd really need to see X and Y
someday. Also our budget is tight -- like, ramen tight. So I was hoping you
could cut us a break, to start, and that way we can be part of this while your
grow the product? We really love your vision for this."

Your move. :)

~~~
corford
me (9 times out of 10): replies saying "thanks, we can't offer a discount now
but we'll ping you with another trial license if we ship feature X or Y in the
future", drags your email to the folder marked "20%", forgets about it and
returns to concentrating on the folder marked "80%" :D

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under_dogg
Counterpoint - from a enterprise IT procurement perspective, if you're not
willing to negotiate the price, as a start-up, you're lowering your chances to
sell it to 0. You may have leverage with the people that will use the
product(s) but all the procurement operations are usually centralized and will
require negotiations at pricing and \ or T&Cs level.

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inthewoods
"People will sometimes reach out and ask for a discount on your product before
they took the time to sign up for a trial and use it at all. What do you do
when that happens?"

Maybe it's just me or the companies I've worked for, but this has never
happened to me.

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gedrap
When it comes to discounts, I like when some companies give discounts for
students. A group of people who are known to be temporarily poor :) If you are
on super super tight budget, $15/mo off can help and start a relationship in
the right way.

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pgstartup
good

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iterable
Awesome

