In many small companies the discount is decided in the moment. A customer hesitates, the salesperson wants the deal, and ten percent is offered because it feels safe. A week later a colleague gives the same customer fifteen. Nobody did anything unreasonable, but the company now has no idea what its real prices are, and customers learn that asking is the cheapest way to save money.
A discount rule does not need software. It needs one price list, a few numbers and a place to write things down. This article describes a version that fits a team of three to thirty people.
Start with one price list
A discount only means something against a reference price. Before setting limits, make sure there is one current list that everyone uses:
- One file or page, with a date and the name of the person who owns it.
- Prices for the standard products or services, and the unit they apply to (per hour, per piece, per month).
- What is included and what is charged extra, so that "free delivery" is not a hidden discount.
- A note on when the list was last changed. Our price change announcement routine covers how to tell existing customers.
If prices are quoted from old e-mails or from memory, fix this first. Otherwise every discount is measured against a different number.
Decide who may give how much
The rule can be a table of three rows. The numbers below are examples; use your own margins.
| Who | May give alone | Above that |
|---|---|---|
| Salesperson | up to 5% | ask the sales lead |
| Sales lead | up to 10% | ask the owner or manager |
| Owner or manager | any, but recorded | no further approval |
Three details make the table work:
- A limit is per deal, not per line. Otherwise five small discounts add up to a large one.
- The approver is a named person with a deputy. "Management" is not a person, and a customer waiting two days for an answer will go elsewhere. Agree on a reply time, for example the same working day.
- Know your floor. Work out once, with whoever knows the costs, the lowest price at which a typical job still makes money. A discount rule that ignores margin only moves the problem.
Ask for something in return
A discount without a condition is a gift. Before agreeing, ask what the customer can give back. Common trades are:
- a larger order or a commitment to a minimum volume,
- a longer contract term,
- payment in advance or a shorter due date (see collecting late customer payments for the other side of this),
- a reference or a testimonial that you may actually use,
- fewer options, for example standard delivery instead of a custom one.
Write the condition next to the discount. If the condition is not met, the discount does not apply, and the salesperson has a reason to point to.
Also be careful with public offers. Consumer protection rules in the EU limit how a "was/now" price may be shown: the reference price should be the lowest price of the previous 30 days. If your discounts are advertised to consumers, check the rules for your country; the sources below give the starting point. Business-to-business quotes are usually less restricted, but the habit of an honest reference price is worth keeping.
Record every discount in one line
The record is what turns a rule into something you can improve. A shared spreadsheet or a field in the quote is enough. One line per discount:
- date and customer,
- list price and price given, with the percentage,
- reason or condition (volume, term, payment),
- who gave it and who approved it, if approval was needed.
Do not ask for essays. If writing the line takes more than a minute, people will skip it. The quote handover described in quote-to-order handoff is a good moment to check that the line exists.
Review once a month
Once a month, the sales lead spends fifteen minutes with the record and looks at four things:
- How many deals had a discount, and how many were above the individual limit?
- Which reasons repeat? If "customer asked" is the most common one, the list price may be too high, or the team may be giving in too early.
- Did the conditions get met? A promised volume that never arrived is worth a note.
- Do the limits still fit? If nobody ever uses the top row, lower it; if every deal needs approval, the first row is too tight.
Change one thing at a time and write the new limit and the date on the price list.
A first week
- Day 1: collect the prices people actually use and agree one list with an owner.
- Day 2: pick the three limits and the approvers, with a same-day reply time.
- Day 3: create the record and add the last five discounts as a test.
- Day 4: tell the team in ten minutes, with one example of a good trade.
- Day 5: give the first approved discount under the new rule and check the line was written.
The rule will not be perfect, and it does not need to be. Its job is to replace a mood with a number, a name and a line of text.
