Credibility issues with discounts

This story is partly funny and partly sad.

A few years back, I was advising an industrial company on their next generation technology initiative. As a part of the plan, the client needed to buy some servers.  The project sponsor promptly invited a large IT company, whose name I shall not disclose. The meeting was productive but the client representative decided to hold back on purchase. On my probing, he disclosed that he bought all the IT equipment at the end of the quarter. That is the time when he got maximum discounts as sales people were in a hurry to meet their quotas.

I found his insight quite amusing and but the client did not seem to be happy. He felt that despite the discounts, he was not sure if he was  was paying the right price. That is is the issue with discounts. It leaves both buyer and the seller joyless.


Should we avoid discounts altogether ?  Not really. That would be counter productive.  As the market is heterogeneous, customers have different willingness to pay. So we need the flexibility to expand the market by giving discounts. What we need to avoid is an unconditional discounts.

Conditional discounts: There are many ways to create conditional discounts. The company selling the server could have linked the discounts to volume of purchase, size of the relationship, access to new business unit of the client, purchase of a new innovative product or to the permission to use client’s name in sales testimonials.

A fair exchange gives a peace of mind to both parties.

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