Your Complete Guide to Discounting

Tactics to systemize smart discounting, and still close deals fast

CFOs HATE the “D” word…

Discounting is like an 11-letter swear word in my home. My two-year-old is still in timeout.

Discounting is not inherently bad. But when done without intent, it’s expensive confusion. Smart pricing leaders treat discounts as on ramps to maximize lifetime value, not shortcuts to close.

In this guide you’ll learn:

• The Hidden Cost of Closing Fast

• Maximizing LTV

• Bad Reasons to Discount

• (Potentially) Good Reasons to Discount:

• Delegating Discounts Without Losing Control

• Trading Speed for Dollars

• When the First Domino Is Worth the Discount

• Maximize the LTV, Play the Long Game

• Protecting the Out Years

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The Hidden Cost of Closing Fast

Sales reps are supposed to do more than just sell product off the back of the truck, as fast as possible. They should be onboarding customers for the right reasons, so their business continues as an annuity, not a one-time sale at a lower margin.

The only thing worse than a normal customer churning is one onboarded at a discount. Many forget the unit economics that permeate throughout the P&L when you give a discount. A 2% discount decreases revenue by 2%. That’s simple. But discounting decreases your operating margins by more than 2%, because you have fixed costs.

Yikes. Too many discounts can cause a non-linear unwinding in your plan.

Bottom line don’t lie.

If a customer buys with price as a primary motivator, rather than a true need, they’re also likely to bounce to a competitor as soon as their price is better. Fickle then, fickle later.

Discounting also coaches customers to devalue your product. Hermes doesn’t run many sales. Lower pricing ingrains bad behavior. And from a negotiation perspective, it gives you a lower jump-off point at renewal, unless you explicitly make it clear that it’s a one-time, promotional discount.

And when you bring LTV to CAC into the picture, if a customer churns after receiving a discount, you're even further from recouping your customer acquisition costs, assuming they all cost about the same to land.

A study by Price Intelligently found that SaaS discounting lowers long-term value (LTV) by 30%, increases churn, and reduces willingness to pay higher prices later.

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Bad Reasons to Discount

Some bad reasons to offer a discount, according to Nic Poulos of Euclid Ventures:

• Competitor pricing is higher

• Customer has budget and need, but won’t pay

• Customer wants new modules or features for free

• Customer won’t commit to anything in return (testimonials, discount timeline, product feedback)

• True need or product fit is unclear (likely to lead to churn)

• Your offering is services-heavy and not cost-scalable

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🔒 Hold up… Want the good stuff?
We just covered bad discounting. Now let’s talk about the smart plays, when discounting can actually drive long-term value.

Think:
• Big logos
• Strategic wedges
• Cashflow help
• Roadmap coverage

💡 Unlock the full list of (potentially) good reasons to discount, and how to structure them so your CFO doesn’t lose sleep.

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(Before you discount yourself into oblivion.)