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While discounts might be necessary to keep some customers happy, having control over those discounts is necessary if you want to improve your profits, says Jim Saunders in Regain Pricing Control. "There's often no real support in place to help you make that decision. It's a lot of gut-feel and stress," he says. And in the end, "everyone feels as if they are being held for ransom."
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To regain control, begin with creating guidelines before the sales force goes out to sell a particular product line. For example, stipulate that you will accept deals at a specific price for a particular type of customer in a product category. "Deal with those questions before you are confronted with a discount," Saunders says. Another control: Require sign-off on deals.
Be upfront about what customers can get for the lower price they are asking for, he says. If they want to pay less than the price you offer, let them know that next-day delivery isn't available at that price point or decrease the services that go along with that product. That way you’re maintaining control, but you’re allowing the customer to better understand the value you’re adding, as well.
Remember: Price is not the only thing that drives a purchasing decision. Product quality, service quality and brand image play a part as well. "Unless you can differentiate on the first three, you're going to end up negotiating on price all the time," Saunders says.