Customer Negotiation: Discounts, Retention, and Value

Are your customers frequently requesting discounts?

Are you left wondering if reducing your prices is the only way to retain their business?

If you’re a Customer Success Manager (CSM) or a Head of Customer Success, you’ve undoubtedly encountered these dilemmas. Fear not; there’s much more to customer negotiations than yielding to price reduction demands.

This post is inspired by episode 27 of our Impact Weekly podcast, where Johan Nilsson and I discuss how to manage customer negotiations effectively.

We’ll unravel why customers ask for discounts, how to respond, and what tactics you should employ to ensure successful outcomes.

Customer Success Podcast: Impact Weekly Episode 27

If you want to go deep on this topic, listen to this episode of our Customer Success podcast, Impact Weekly, that comes out every Wednesday. You can listen below or on your favorite podcast app:

Understanding Customer Motivations

Firstly, it’s crucial to understand why customers ask for discounts.

Customers don’t always demand price reductions due to budgetary constraints; sometimes, they are testing their value to your company or are influenced by discounts offered by competitors.

When customers ask for a price cut, it’s an opportunity for you to dig deeper and understand their true motivations.

Ask them to elaborate on their needs and don’t be afraid to confront silence – you might be surprised at what it reveals.

The Power of Directness

If a customer asks for something that goes against your company’s policies or rules, you should give a direct response.

People-pleasing is counterproductive in negotiations; it’s better to explain your company’s standpoint clearly and firmly.

For example, if a customer demands a discount you’re unable to offer, don’t dodge the question. Instead, respond with something like, “We appreciate your business and understand your concerns. However, our pricing policy doesn’t allow for further discounts on our core product.”

Offering Alternatives

After turning down a discount request, offer the customer something else. This keeps the negotiation going and maintains a positive relationship.

For instance, you might be able to offer discounted or free professional services, integration, or training. This approach ensures the customer feels valued without impacting your recurring revenue negatively.

Bringing in Specialists

As a customer success professional, your role is wide-ranging. If you’re spending a significant portion of your time negotiating with customers, it may be time to delegate this task to a negotiation specialist or an account manager.

This isn’t about trusting or damaging your relationship with the customer, but about managing your capacity and focusing on delivering high-quality customer success management.

Negotiation Tactics

Here are a couple of super-powerful tactics to consider.

When a customer requests a discount, you can offer to set up a meeting with a salesperson or negotiation specialist. This often halts the request as many customers aren’t eager to enter a formal negotiation.

Alternatively, if a customer mentions a competitor’s lower price, suggest that if budget is their only concern, they should consider the competitor’s offer.

This can make the customer reconsider the importance of other factors such as service quality, switching costs, and the value your product provides.

The Quid Pro Quo Approach

Quid pro quo is a useful strategy in negotiations. If a customer asks for a discount, counter with an offer that benefits both parties.

For example, you could propose a discount in return for a longer commitment or increased user numbers.

This method ensures you don’t just give in to demands but negotiate to achieve a win-win situation.

Make an Impact… Weekly

Don’t miss out on similar insights and more by subscribing to our Impact Weekly podcast. Every Wednesday, we share valuable tips and strategies to navigate the complex world of Customer Success Management.

With the Impact Weekly podcast, you’ll stay one step ahead in your journey to Customer Success excellence. Subscribe today, and never miss an episode!

About Lincoln Murphy

I invented Customer Success. I focus primarily on Customer Engagement. Learn more about me here.