Discounts in Every Day of the Life: Are Discounts Necessary in B2B?
Seasonal discounts, two for the price of one, crossed price tags and other promotion actions are standard retail instruments. Whether they are necessary for retailers or not is out of the question. There are enough discount hunters in other product categories. But when it comes to sales in the automation business sphere, the need for discounts are less obvious.
The Wrike, Inc. develops a cloud service to manage projects and nearly 100% of its customers are corporate users. The service offers several tariffs paid subscription after two weeks of trial period and operates in a very competitive market. We often think of delicacy in working with discounts, and will explain some in this article.
What’s wrong with discounts?
There is a popular and relatively radical approach that discounts are not permitted in general. And the reasons are quite rational. Firstly, when you convince a buyer with a discount, you neutralize functional advantages of the product, and shift the focus on the price. Customers will no longer compare you with competitors because you’ve got a convenient Gantt chart, options to customize workflows to the company or working hours’ features.
You will give a buyer an impulse to compare services using one single parameter even if other options are much weaker and can’t provide a relatively high return on investment. There are studies that show that the cheaper product you offer, the less efficiently it will be used and will be perceived with great skepticism by the consumer.
In addition, each discount can have a rather a disastrous impact on the value of your product in the eyes of the consumer. If your “50% discount” is fixed in your site during a year, the standard price will be gradually perceived as high. You will unlikely explain your clients that you were willing to forget about the profit for a year and engage in predatory pricing for a market share, but now you’d like to return everything as it was.
Finally, the price is not formed out of the blue. Development, marketing, customer service costs and profits to be invested in the company’s growth are taken into account. All planning and forecasts are influenced by the price. A discount is a serious action, which in the event of demand growth misprediction can have an extremely negative impact on business.
The last argument
All these arguments make sense but they are reasonable only if you don’t work with the audience targetedly, giving discounts to one and all. We, the Wrike, are not so radical and don’t flood the Internet with ads and banners like “sales of the century” or “cheaper only for free.”
For specific people and situations, discounts are used more selectively. For example, we offer a discount by email to some users within two weeks of the trial period.
Every day thousands of companies start a trial period in the service, so our system construct a priority “queue” for each sales employee, qualifying a potential client for ten characteristics. This may be availability of the contact’s corporate email, phone number, position etc. So we can ensure that sales managers spend their time with maximum efficiency.
The discount is provided for people who haven’t communicated with our staff but the system identifies interest to the product due to the online behavior. Often this means that the person is in the process of selecting the solution, already understands our functionality and has tried it on for his team, but he lacks the final argument “for the Wrike». Our email discount becomes the final factor that outweighs the scales.
Many of our special offers are targeted at different countries. Among other things, geotargeting helps us to work in countries with high volatility of the local currency. The Wrike prices are denominated in dollars so when the Brazilian Real and the Russian Ruble are falling we can propose the customers from these countries to request managers for a special discount.
Discounts in package proposals, together with partner’s services or products, also seem to be quite acceptable. For example, customers can enjoy a discount to order a new website for the company and, at the same time, a project management system for their team. Such proposals are interesting because they don’t absorb the revenue. You offer a discount to new consumers through a partner, and that means that you increase a chance to compensate the lost profit with the demand.
Moreover, any service on a subscription prefers annual payments to monthly ones. That’s why we, like many others, are willing to offer a 30% discount for an annual payment.
B2B-market is interesting because frequently one people take a service purchase decision while others enjoy profit of using it. This is especially true for recent years, when not only the CEOs and IT services but also team leaders and employees may determine proposals for joint work and productivity increase. This trend is known as BOYA (Bring Your Own Application).
It gives B2B such a B2C-marketing feature as working with personal preferences and interests.
The main feature of B2B is a small amount (compared to the mass market) sales with high average transaction amount. This means that each transaction is unique and you can find a special approach to every customer.
For example, we can extend a free trial period for a large company. The decision to purchase a product in such company, as a rule, is made by a wide range of people, and the service will also be used in several departments. Standard two weeks to familiarize may not be enough. Plus several free days are a small sacrifice if, as a result, the client decides to connect not only the marketing department but, for instance, he or she will advertise the service to colleagues from the design department.
Also, in the event of the most advanced tariff plan of the Wrike Enterprise which is usually used by large customers, we do not indicate the price on the site. Instead of that, customers are proposed to contact sales manager for optimal offers. I am aware that many people do not like this approach. Critics say it is a kind of Asian market where everyone bargains and goods cost as much as the buyer can pay. However, in this case, the motivation is different.
We are really willing to do a lot of steps towards the client. Managers make concessions when they see a large team, the desire to pay for a long term use, the prospects for the connection of additional departments of the company, a promising industry and / or region and also they take into account many other factors, including seasonality.
Theoretically, we could try to implement the logic right on the site. However, it would be a long multiplicative test with a variety of issues; the results would make the price. To leave a request is lot easier. This approach works, and sales of the Wrike Enterprise are growing faster than any other tariff; they doubled in 2015.
The main picture was taken from freepik.com