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  • Writer's pictureJoel White

(Ir)rational Discounting

Which discount incentive best protects your margins:

  1. 5% discount off your rates

  2. 5% discount off your bottom line price

  3. Up to 5% rebate depending on volume of fees paid each year

The obvious answer is #3, right?


Yet odds are extremely high that your company's pricing policies empower frontline staff to approve options 1 or 2 on the fly, but require multiple special meetings and analyses to secure approval from executive management for option 3.


Why?

  • #3 is labeled "strategic pricing"

  • #3 is "MSA level", while 1 and 2 are project level

  • #3 involves more legal terms

In the proposals world, any option that can be approved faster, with less bureaucracy, will be used far more commonly than options that require the opposite.

Consider instead:

  • All discounting is "strategic pricing" if the goal is to win new business.

  • A 5% project discount on one project typically creates a precedent level that is honored on future projects, creating a de facto MSA level discount.

  • Related legal terms are easily templated and don't need to be written longform at the proposal stage.

  • Educating and empowering pricing teams on these nuances leads to more dynamic team members.

Make it easier to implement smart incentives.

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