Why discounting doesn’t help your Sales team achieve quota
Closing deals is never easy, and in today’s market environment, it can seem harder than ever. Potential customers have budget constraints and overflowing tech stacks with more options than ever, leading to increased scrutiny of any new purchases. Often, Sales teams will offer discounts in order to push a deal through.
We’re in the business of analyzing B2B SaaS deals, and here’s what we’ve found:
Discounting does not help with quota attainment.
While it may sound counterintuitive, the evidence points in one direction. Today, we’ll break down the details of why discounts may actually contribute to stalled deals, and how you can push deals through the finish line at higher Total Contract Value (TCV).
The numbers behind our B2B SaaS sales analysis
We analyzed over 40,000 deals from nearly 400 B2B SaaS companies to see if we could identify a correlation between discounting and achieving quota, and the link couldn’t be found. The correlation was 0.04, which clearly doesn’t move the needle.
B2B SaaS customers expect discounts for signing deals
The average SaaS discount is around 17% for an annual deal. Losing 17% on every deal, while also facing elongated sales cycles, higher Customer Acquisition Costs (CAC), and longer CAC payback has a ripple effect across metrics and can seriously impact growth YoY.
The first way to work around the expectation for discounts is to incorporate it into your pricing strategy. We built guides to help B2B SaaS companies plan price adjustments and build out a strong pricing strategy.
How discounts can harm sales quotas
A discount seems like a no-brainer when it comes to closing more deals and meeting revenue goals, but offering “money off” can send the wrong message and cost you more in the long run than you discounted.
Discounts can attract the wrong buyers
If you’re willing to sell your product for less, it can reflect poorly on the perceived value of your product. If you appear to undervalue your product, your customer will, too. This can lead to issues with non-renewal and churn at the end of every contract period, as customers fail to see and use the full value of your product. These customers may ask for discounts repeatedly in order to renew.
Quantity over quality isn’t a strong foundation
If you offer discounts on every contract, your Sales team must naturally close more deals overall to capture the necessary revenue. This means onboarding more customers, expanding your Customer Success team, investing in expanded troubleshooting capacities, and preparing redundancies to deal with a larger number of customers – a number that you may not be prepared to scale for.
Longer sales cycles, not shorter
While discounts may appear to push deals through faster, the reality is that customers will often delay signing in order to see if they can secure an even steeper discount. Longer sales cycles + discounts = higher CAC and elongated CAC payback.
Payment flexibility is key
In a survey from Lightspeed, respondents reported pricing flexibility to be an important part (38%) of deals won.
Offering flexible payment terms can be the difference between winning and losing a deal. A B2B buy-now-pay-later (BNPL) platform streamlines B2B payments by allowing vendors to easily offer flexible payment terms that meet customers’ needs.
Working with a B2B BNPL
A B2B BNPL platform like Capchase Pay streamlines the closing process and allows customers to feel empowered when it comes to selecting the way they make their payments.
It helps customers feel heard and considered, which can improve retention and customer loyalty, and helps accelerate sales cycles, lowering CAC in the process.
Capchase Pay:
- Integrates seamlessly into your checkout process
- Qualifies and approves your customers fast and frictionless
- Lets customers choose their own payment schedule
- Manages billing and collections on your behalf
Most importantly, Capchase Pay gives you full TCV upfront, so you can invest in your product, growth, and marketing.
Doing better than discounts
Capchase Pay makes it possible to close more deals, faster, and at higher TCV – without relying on discounts. It’s a compact tool that has a wide-reaching effect across countless metrics.
