Discounts are often used as a tool to increase customer acquisition in the SaaS industry, with the belief that customers will be willing to pay the full price once they recognize the value of the product. However, this strategy may sometimes prove counterintuitive to your end goal.
In this episode, our experts discuss the pros and cons of discounting, exploring how to strike a balance between attracting new customers and maintaining profitability. Learn when to use discounts effectively, and when alternative strategies may be more beneficial to your business. With practical tips and real-life examples, this episode will help you navigate the discount dilemma and make informed decisions about your SaaS pricing strategy.
Welcome to 20 days of pricing tips—part 19. I’m Alexa, a member of the pricing team and I’ve worked on 36 pricing projects. Today we're breaking down Discounting.
Many SaaS companies turn to discounts as a tactic to increase acquisition. The thought here is usually that once customers see the value of the product, they won’t be bothered by paying the original sticker price. But this actually may be counterintuitive to your end goal.
An aggressive upfront discount as an acquisition tactic without consideration of retention strategies such as onboarding and customer success, can result in high turnover rates and loss in revenue. Improper discounting not only directly affects your actual revenue, it also can kill your momentum as a company by training both your customers and your team to devalue your product.
For you sales team, discounts can be viewed as the path of least resistance to close a sale, but this may diminish the culture of value based pricing and profit you want to center your company on.
Now, we're not saying that you should never offer discounts. In fact, they can be useful, especially for promotions and deals during certain times and events. What we are saying is that discounting isn’t a tool you should always use.
Thanks for checking out our pricing tips. If you want to connect with our pricing team email Patrick@profitwell.com and we’ll send over the intro.