Your Company Wants More Customers
Every SaaS company wants more customers. A discount offer on your pricing page can reduce conversion friction and encourage more potential customers to buy.
But if you're relying on discounts to push people through your pricing page, you need to fix your page. The communication between value and price can be lost on the pricing page if the page is difficult to understand and doesn't encourage action.
Potential customers that are not inspired by your pricing page will spend more time in the sales cycle because they won't feel confident in their purchasing decisions. They should not need discounts to feel this confidence—they should understand the value they're getting based on how you've laid out your pricing, positioning, and packaging.
Companies that use sales teams will find that the desire to close more deals drives the discount offer. Jason Lemkin, SaaS founder and VC, points out that “time is the enemy of deals.” Discounts shorten the sales cycle, and shorter cycles mean reps can complete more deals in the same amount of time.
If the offer of a discount shortens the average length of the buying process portion in the sales cycle by 2 days from 9 to 7 by reducing decision time, the overall length of the sales cycle shortens from 30 days to 28 days. This shorter cycle would mean sales reps can nearly fit an entire additional sales cycle in the course of a year—thus the draw of discounts as a “quick fix.”
But while the brute force of a discount might be effective in simply closing a deal quickly, reliance on this strategy means that your main selling point is a low price. If you routinely rely on discounts to close deals, there might be a fundamental misalignment of your original price and value.
That's why it's essential to make sure your product fills the needs of your market. Entrepreneur and angel investor Sean Ellis says that you need to make sure your product is a must-have for your market. To determine if you have created a product that your market wants to pay for, survey your customers and ask how they would feel if they could no longer use your product.
Ellis says a good indication of product-market fit is finding that over 40% of them would be “very disappointed.” If your survey results show less than 40% feel this way, communicate with customers about what else they might look for in your product so you can better align the value of your packaging with prices that lead to profitability.
Shortening your sales cycle is essential to meeting revenue goals and improving the overall machine of your business. But using a discount as a crutch to meet these goals speaks to existing problems in price-value alignment that will only compound if not addressed.