Sequential discounts

What do you think is your discount if someone sends you a proposal for 100 Euros but offers you a discount of 50 %? That´s easy, you say. It´s 50%.
Have you seen a discount of 25% + 25%? This is called a sequential discount and it IS NOT 50%! Let´s try calculating it:

• the base: 100$
• discount No.1: 25%
• price after discount: 75$
• discount No.2: 25%
• price after discount: 56,25$

What is your discount, then? 44.75%! And your supplier has saved 5.25% by using this trick. Quite amusing, isn´t it? My math teacher would kill me if she saw me writing 25+25 <> 50, but “such is business life”, I would have to say.

P.S.: Recently, I got an offer with a 15%+10%+5% discount. After I calculated it I realized my discount was actually 30%. My supplier has obviously seen this type of discount somewhere, but I don´t think he noticed how to calculate it.  

What is a good price quote supposed to include?

To create a price quote you need to ask yourself two basic questions. To whom and what are you going to offer. An answer to the first question may or may not be that simple. If you address your proposal to someone who is not in charge of the money, you are most likely just wasting your time.

I read somewhere that if you are presenting your products to someone who doesn´t normally make decisions about buying, your chances to sell are beforehand close to zero. 

But let´s go back to the question of what you are going to offer. That´s an even tougher nut to crack. What does the customer actually want? You may know the story about a drilling machine, so I will describe it in short. A guy comes to a shop asking for a drilling machine. The shop assistant shows him all types he has, describes technical parameters, hands him several brochures and sends him home to think it over. But, he failed to ask what the customer actually wanted. He, in fact, only wanted to make a hole...  

And now try to imagine it in your offer. What are you offering? Drilling machine, of course. It will include a nice photo, description, price, motivating discount, manufacturer´s logo, country of origin etc. But remember that your customer is buying the drill to make a hole he needs. Perhaps he might appreciate some tips, good advice etc.   

Enough about drills. What I´m trying to say is this: Make sure to always include (besides the product you are offering) some information about how this product might help with the problem your customer is facing, what is it for. Right away you have distinguished yourself from most of the competition.

Does packaging sell?

It is a typical Saturday morning and you went out to do some shopping. If you see more comparable products, which are you going to choose?

1. the one you know well and have had a good experience with
2. the one that was recommended by a person you trust
3. the one you saw in an ad
4. the one with just the right price? if something is too cheap, you don´t trust it, if it´s too expensive, it may not be worth the money for you
5. the one with nicer packaging, it seems more professional, perhaps

Since you are reading this blog I´m assuming you, too, generate price quotes on regular basis and thus are on the selling side of the business spectrum. Why should your customer act differently than you behaved during your Saturday shopping?

From the above mentioned points I´m going to concentrate on the last one. Could the price quote you create be considered your product, too? I´ll tell you something that might elevate you above your competition. The price quote really is your product, your creation, and it is, in fact, the packaging that sells.

It is better not to underestimate this packaging, this way of presenting yourself to customers. In future articles I´m going to add a few more tricks that can help to bridge the gap between proposals and completed deals.

P.S.: Recently I heard about a businessman who is able to literally present his offer on a piece of toilet paper. Interesting way of distinguishing oneself. I´d rather go a safer way.

Does the cheapest always win?

Some may agree. Others use a special method of disregarding both the most expensive and the cheapest offers. How is it, then?

Recently I was sitting with a friend who was talking about garden shears. „I bought the more expensive type as I don´t want them to break in my hand“, he said. He didn´t want to sacrifice his finger for a better deal. To him, his health is obviously worth more.

Why are you, actually, more expensive and not the cheapest? I´m asking, because if you were the cheapest, you wouldn´t be complaining that someone has shot ahead of you with a better price, would you? If it is true that you offer basically the same or even less than your competition, then you have a problem. More often than not, however, you´ve got something extra, better service perhaps, quicker delivery, higher quality, a guarantee, no hidden fees that will unexpectedly surface later on. Reasons why you are the more expensive one are more than enough.   

However, how is the customer supposed to know this? You´ve sent your offer and are waiting to hear from him/her. And do you think you are the only one who has sent an estimate? And if your competitor, who is possibly more expensive than you, calls the customer and explains why he/she is the best, you will wait in vain.  

I strongly recommend you to call your customer a few days after sending a proposal. Just see how much your revenue goes up. It´s that simple.

P.S. Recently I was visiting a company that sells garage doors. I asked them whether they are in habit of contacting people they´d sent proposals to. The answer was quite “cute”. No way! We would have to hire more people, if there was more business.