Recently I was talking to an entrepreneur and he asked how discounts worked for our sales team. I explained we have a structured system to remove ambiguity and maximize autonomy for sales reps (how often have you heard the refrain “let me go ask my manager for a discount”).
Here’s how an example structured discount policy might work:
- For every $12,000 in annual contract value (ACV) sold, the rep gets $600 ACV discount for future deals
- Discounts are accrued in a discount bank and don’t expire
- No deal can be more than 25% off the retail price
- No deal can be below a certain floor
- If a customer pre-pays for a year, they get an extra 10% discount
- If a customer commits to a longer contract, each additional year gets a 10% discount
So, the star reps that sell more deals get more money for their discount bank. Interestingly, the higher producing reps, with more discounts at their disposal, actually offer fewer discounts. Most startup discount policies are too vague and result in ambiguity (should I wait until my boss is in a good mood after his coffee to ask for this discount?). Startups should implement a structured discount policy and make everything easier for their sales team.
What else? What are some other thoughts on a structured discount policy for startups?
David Cummings on Startups 