Discounts versus Profits
Do you have (or have you ever had) one of those salespeople who thinks that giving a discount is the easiest, quickest way to make a sale? Of course, they may be right, but what about the profit (your profit) they’re giving away?
If your product has a profit margin of 30% and your salespeople give a 10% discount to make the sale, you’re losing a massive, one-third (33.33%) of the available profit!
If you are selling, or have others selling for you, you must protect your price and your margins. Teach your people not to hesitate or stutter when a buyer insists on a lower price. Start using tactics to hold firm on your prices. Sell value…perceived and real.
Do you think it’s possible to work 50% less and earn the same income from selling?
You bet it is! Here’s how:
Suppose your company sells pumps, with a selling price of £10,000 per unit.
Assume that your net cost per pump is £7,000.
That means that the net profit on each pump would be £3,000.
If ten pumps are sold at the full price, the net profit for your company will be £30,000.
Compare this with again selling ten pumps, but this time at a discount of 10%.
The total selling price for ten pumps is then £90,000.
The net cost for ten pumps remains at £70,000.
The net profit has decreased to only £20,000……
compared to the original transaction £30,000 where no discount was given.
If your company continued to sell at 10% discount, then you’d have to sell 15 pumps to achieve a net profit of £30,000.
What are the lessons to be learned from this example?
A 10% discount means your company must sell 50% more units (15 instead of 10) to earn the same profit.
A 10% discount means someone has to work 50% harder to earn the company the same profit.
By not giving discounts, in essence the company can “work” 50% less and earn the same income.
In spite of this, you might still think, “But, if I don’t give discounts, I’ll lose sales! It’s an industry norm to give them...everyone does. If I don’t give discounts, they’ll go to the competition!”
And you may be right, of course. You may lose a few deals if you don’t give discounts…but the good news is you can afford to…and still make the same or more profit.