Question: If you gave a customer a 10% discount, how much more volume would you need to sell? 
Whenever I train sales teams on negotiation, I start by asking them that question. Usually there are a few answers of "10%" before someone suggests it might be higher. Only occasionally does anyone in the room get the right answer, and almost always, the majority are surprised when I show them.
Sales teams can be your greatest asset, but the discounts and deals they give can equally generate the greatest hidden costs in the business. But it doesn't have to be like that. Here are the seven steps sales teams can take to make sure they don't give away the farm just to get the sale.
1. Separate the Sale
The most powerful and profitable sales processes focus on getting a conceptual agreement to the sale before terms are ever discussed. The seller needs to listen, to develop a deep understanding of what the buyer wants, what is most important to them and why, and what it's worth to them to get it. Too many sellers waste time and energy banging on about things the buyer simply doesn't value.
2. Establish Equality
Many buyers can be arrogant, and often, sellers become overly accommodating and submissive in response. It's reinforced in subtle ways, for example by the buyer keeping the sales person waiting before a meeting. These tactics undermine confidence and self-worth, reducing the sellers perception of their own power and increasing the likelihood they will make simple and regular concessions. Sales people must ensure they see themselves as a peer of the buyer, who's time is equally important, if they are to hope to negotiate on an even footing.
3. Select the Style
Sales people gravitate towards a collaborative style, often irrespective of whether that is appropriate. Genuinely collaborative relationships are characterised by a focus on overall profit (not price), a broad raft of opportunities, high mutual dependency and trust. Sales people need to be objective about what the best style should be for a given customer, however uncomfortable that feels. Adopting a collaborative approach with a competitive buyer in a tactical negotiation is a sure-fire way to lose money.
4. Understand the Profit
The sales team are not there to deliver sales. They are there to deliver profit from sales. If a sales person is empowered to negotiate on elements that affect profitability, they need to be accountable for that profit, not just the top-line sales. What information do they get on the profit they are generating after all the discounts and costs? And how are they targeted - on top-line sales or bottom-line profit?
5. Plan to Negotiate
It sounds obvious, but how many of your sales team do a formal negotiation plan prior to a meeting? Do they set the agenda? Do they plan their proposals and moves? Do they understand what the buyer values most? Do they think about how they can apply pressure and use competition? Do they prepare responses for the likely challenges? If not, they are leaving money, and opportunity, on the table.
6. Build the Dependency
Low-dependency relationships are much more likely to be competitive and less profitable than high dependency ones. Increasing dependency not only helps to increase negotiating power, but paves the way for a more profitable collaboration. So how much do your sales teams think about building the longer term dependency, versus simply bagging the sale?
7. Empower to Disempower
The ultimate way to stop sales teams giving discounts is to limit their capability to give them. However a far better way is to give them the six steps above, and teach them to disempower themselves as appropriate. Give them the responsibility and the accountability to set their own limits appropriate to the negotiation.
Bottom Line:
For many businesses, trade discount is one of the biggest single costs on the books. What are you doing to educate, empower and reward your people to make sure every penny is spent wisely?