Discounting and SaaS
Watchout: Book Recommendation at the end
You launched your SaaS with a shiny new website, strong features, and pricing you sweated over for weeks. But now growth is sluggish. You’re tempted to juice signups with discounts and promos. Pump the brakes — discounts aren’t a magical growth elixir. Used poorly, they can tank your value perception and margins. Here’s how to thoughtfully decide if, when, and how much to discount.
Let’s start with a blunt truth: If your product is a Blackberry phone, no amount of markdowns will make people buy it in the iPhone era. Discounts don’t fix fundamental product-market issues. Don’t put lipstick on a pig. Instead of slapping a band-aid discount on lackluster traction, dig into understanding and addressing the real problems.
Okay, so you’ve nailed product-market fit and have happy users. Do you even need discounts? Like a blockbuster hit, you might cheapen your perceived value by giving it away too easily. Optional pro tip — wield your pricing power if you’ve got it.
What if a good prospect asks for a discount? Don’t jump straight to “How much do you want off?” like an overeager sales rep. Make them work for it a bit or risk signaling you’re ready to negotiate against yourself. If it makes sense to close the deal, carefully weigh how much of a discount is too much.
Here are some recommendations on when to leverage discounts and when to steer clear:
When to Use Discounts
Launching a new product
Discounts can help attract early adopters and build momentum for a new product launch. Consider a limited-time introductory pricing promotion.
Entering a new market
Special pricing promotions can help expedite acquiring an initial customer base in a new target market. But have a plan to phase out discounts over time.
Competing against low-cost players
Selective discounts can help eliminate a pure price objection when competing head-to-head with low-cost competitors.
Motivating upsells
Discounts on higher tiers or bundles can incentivize existing customers to upgrade their usage.
Bringing back churned customers
Special win-back offers for churned customers can cost-effectively reactivate lapsed relationships.
When to Avoid Discounts
Already have strong product-market fit
If your product already resonates with your target customers, avoid diluting perceived value with unnecessary discounts.
Trying to fix more fundamental issues
Discounts may provide a quick fix, but don’t gloss over deeper problems better addressed by improving product-market fit.
Discount heavily requested by customer
Proactively offering a discount could signal willingness to negotiate down. Only use if needed to close.
New customer has high base value
Offering unsolicited discounts to an already interested high-value prospect could leave money on the table.
Margin impact is too severe
Avoid steep discounts that would significantly degrade the profitability of the customer relationship.
And finally
Look, discounts aren’t inherently bad. Used strategically, they’re a powerful tool to hit growth targets. Just be thoughtful. Follow these tips and you’ll be less likely to end up hawking your goods at a garage sale. Now go forth, discount wisely, and may the growth be with you!
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