Balancing the Desire for Full Paying Customers with the Need for Discounting

One of the challenges that arises when working to achieve product / market fit is around charging full price to a new customer vs offering a discount to get a customer that wasn’t going to pay retail. Of course, in an ideal world every customer would pay retail and be a reference. In reality, the personalities and budgets of the people making the buying decisions come into play and there are desirable accounts where a special arrangement is required.

Here are a few thoughts on the balance between full paying customers and discount customers:

  • At the earliest stage, any customer is better than no customer, but the key is that they have to pay something to have some skin in the game (the corollary is that they have to actually use the product as well on a regular basis and not just pay for it)
  • As the product matures and new features are introduced, sometimes it’s required to offer a discount to the first few customers that need the new feature so as to have a willing guinea to work out any kinks (this is especially true when moving up market to more complex customers)
  • Develop a written discount policy so that there’s clarity throughout the organization and the sales reps are more autonomous

As the startup grows and matures the desire to discount should decrease and the number of reference customers should increase. As with anything there’s a balance to be had and it takes time to find out what makes sense. Do whatever it takes to get oxygen for the product and then slowly introduce more standards around pricing.

What else? What are some other thoughts on balancing the desire for full paying customers with the need for discounting?

2 thoughts on “Balancing the Desire for Full Paying Customers with the Need for Discounting

  1. Pricing is a funny thing. I think most of the time when a customer is asking you for a discount, they are communicating that they don’t understand your value proposition. If you are offering $10 in value for $1 in cost, a 10% discount shouldn’t change a “no” to a “yes”.

    At the end of the day you still have to close the sale, so I always like to set prices high enough that there is some wiggle room. It’s much easier to lower a price than it is to raise one.

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