Our SAAS pricing is basically done on a user level basis, 2, 8 or unlimited users. I am considering changing this to 1, 5, 10, Unlimited but for now that is what we have. Anyway, it is not uncommon for clients to who have 3 users to ask for a discount, or to be able to go on the lower level plan.
What is your strategy for dealing with this? Do you just give them the discount out of good will?
One thing I am considering is if I give them the discount but ask for a testimonial in exchange.
If I think it will make the difference between a sale and no sale, I might.
But bear in mind that customers that ask for a discount are unlikely to be your best customers. Asking for a big discount is a warning flag.
That sounds a bit sleazy IMHO. It is hardly a genuine testimonial if they have been effectively paid (with a discount) to give it. Asking them after they have paid is ok though.
I only give volume discounts when the organization has many users. I wouldn’t give a discount if they only had 3 users, but I would if they had 50.
My rule of thumb is: Always give refunds; Never give discounts.
My experience echoes @Andy’s. Discount requests serve as a warning that the customer is going to be anything but your best. With the plugins I run, I already offer discounted packages when you buy the whole bundle and I get people asking to get those for free because they’re a non-profit or someone that “can’t afford it”.
I respond to discount requests with a line from Sarah Hatter’s Customer Support Handbook (a must-read for all SaaS owners, IMO):
“We’ve priced our products fairly so they’re economical for all types of businesses, including non-profits. We also offer a free version you’ll never be charged to use. To treat all our customers equally, we’re not offering additional discounts at this time”
Asking for a discount is just a signal to me that you’re not my ideal customer and will have a hard time seeing value in things.
Regards charities asking for discounts: My wife volunteers for a community radio. It is run entirely by volunteers. They take ads because they still have pay for the music they play, and things like rent, bills etc.
Everyone knows this is a non-profit radio, mainly because the hosts repeat the message. And yet, the station manager gets calls from other charities asking for freebies.
“Come on, we are doing it for a good cause.”
“So are we,” the manager always replies.
Not only do charities, but the local government asks for freebies too.
Like the station manager usually tells us, charities are used to paying for a lot of things. They have to pay rent, bills, in some cases salaries. They are used to paying for things, just like any business.
So don’t feel guilty about saying no to charities.
When you’re starting off and trying to capture market share, then discounts may make sense. To think of it another way: can you walk away from this sale ? If yes, then don’t offer it. If no, then do offer it.
This does, however, become a double edged knife: once you give out a discount that’s not advertised, that client/user may come back with more referrals - which can be good for networking effects, but bad because you may be leaving revenue on the table.
The rare couple of times someone asked a discount, I exchanged a few emails with them and there was always a misunderstanding about the benefits of the product.
So my focus is: explaining the value brought by the product (with more depth) to this specific customer, and then rework my copy if needed so that the value is explained in better shape.
My rule of thumb is the same as @coreysnipes.