The Hidden Costs of Discounts: How Heavy Discounts Can Devalue Your Product and Drive Churn

🛑 Are you relying too heavily on discounts to close deals?

According to research by ProfitWell, 70% of SaaS sales leaders consider discounts important or very important to success. And over half of those leaders said they regularly hand out discounts of 25% and over.

So why is this a problem..

💸 Discounts devalue your product.

Think of your price as the exchange rate for the value you're providing. If you offer heavy discounts, it sends the message that your product's value is lower than it actually is.

📈 Churn rates are higher for discounted customers.

Customers who received discounts have over double the churn rate compared to those who didn't. And the higher the discount, the higher the churn rate.

💼 Customers are trained to devalue your product.

Customers who received heavy discounts have a worse willingness to pay than those who received a lower discount. This makes renewal time particularly painful as customers don't fully see the value in your product.

🧐 Use discounts wisely.

Discounts can be helpful, if used efficiently, to lower the activation energy of a prospect and help them see the actual value of your product. Implement a clear, enforceable discounting policy for your customer success and sales teams to help ensure discounts don’t become a crutch for closing or renewing every deal.

💡 The bottom line:

Be cautious with your use of discounts. They may seem like a quick fix and drive revenue, but in the long run, they have an outsized impact on your business.

💬 Have you witnessed the impacts of deep discounts firsthand? I’d love to hear about it… Join the discussion on LinkedIn

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