80% of B2B marketers do discounts the wrong way.
Discounting is the most common marketing tactic in the world.
Yet, 80% of marketers do it the wrong way.
A couple of years ago, Profitwell researched what B2B SaaS companies and marketers get wrong about discounts.
Here are the 3 key lessons to remember.
👉In B2B SaaS, treat discounts as a nudge to get the person already interested over the edge.
Don’t use it as a tactic to go after cold customers.
Software isn’t a pair of purple-colored socks you buy because they’re on sale.
SaaS is a relationship-based business model. You can’t pull one over a consumer.
So, every customer must see and continue seeing the value of your product.
And even if someone buys it just because the deal was so good, but they don’t like it, they’ll churn.
👉Discounts should be time-boxed. Ex: Offer discount for the first 3 months of the annual plan.
👉In B2B SaaS, don’t go over 20% discount.
If a discount is over that, the churn rate doubles.
And if it’s over 30%, the willingness to pay for renewals dramatically decreases.
These customers might actually be a poor fit for your business. And they don’t value your product.
So you’ll waste your time serving them, and they might guide you in the wrong direction.
That launches a downward spiral of ruining the whole business.
Of course, the problem with this is that Profitwell discovered that nearly 80% of respondents(sales and marketing practitioners) believe a 25%+ discount is appropriate.
And over 70% of respondents believe discounts should be used to close deals.
Which is already ruining the bottom-line business.
📣So, to sum up, you don’t want the customer to buy your product just because of a discount.
Instead, you want the discount to be a nice to have reason to move on with the deal *right now*.
You should train the target customer to pay as close to the full price as possible from the get-go.
Otherwise, discounting attracts poor-fit customers who are not willing to pay for your product, and you’re slowly ruining your business.
👉And let's not forget Rory Sutherland's brilliant words: every idiot can sell things by offering a discount.
The art of marketing is selling them by making them seem better.