How to calculate your sales reps' discounting value by sales funnel stage

In this series, we've covered Funnel Conversion Rate and Stage Tenancy. Both have given us huge opportunity to understand how and why we perform, spot data outliers to drive process change and improve data integrity, and bolster our sales enablement efforts and investments.

Crucially however, we've seen the huge impact on revenue should we be in a position to move the needle on these metrics by just a tad!

By improving just one of the stage conversions and shortening the duration spent in one of their sales stages, we've already seen ReachOut&TouchBase.io increase their monthly revenue potential from £200k to £270k.

Let's see if we can add to that as we explore the third and final metric in the series.

This week, we'll be taking a look into Stage Discounting. This may be a new one for some of you, however I believe it's crucial when it comes to ensuring our sales enablement strategies are bolstered with data-driven direction.

Stage discounting does what it says on the tin. It's a look into the extent we drop the value of our opportunities as we move through the sales funnel.

So, as usual, let's take a look at how we can calculate Stage Discounting, and what we can do with the data once we have it at our fingertips.

Step 1 - The Maths

Firstly, we need to get the company-level stats to get a sense of our weak spot. Those of you on a decent CRM such as Hubspot, Salesforce, PipeDrive et al, should be able to achieve the below.

Note - Your "amount" filed will hold time stamps in the opportunity history table. These times stamps, coupled with the time stamps in your opportunity stage history, when correlated, will enable you to spot how much the value field changed by, and what stage the opportunity was sitting in at the time. We're looking for an average of these changes over a set time period.

For ReachOut&TouchBase.io, it looks like this. The overall average discount is £2000 on the nose, but now we can see exactly where the sales team are discounting.

For me, this suggests that salespeople are feeling compelled to offer a discount when they send out an initial proposal prior to negotiation. We'll come onto what this is telling us later.

Step 2 - Granularity

We need to understand where ReachOut&TouchBase.io can actually influence and make an impact on their discounting issue. For this, we should look to produce the above data but split it by salesperson, business line or geography. Tempting as it is to go and grab the nearest sales coach that can change the mindset of your salespeople at proposal stage, we need to understand what's happening at a local level.

Let's take a look at salespeople and identify patterns and outliers:

Once again, our man Amir comes out on top and brings the average down. £600 difference between our best and worst discounter at proposal. We need to speak to Bruce and Amir to understand what they do differently when putting proposals together, conversations they've had with the client, and their mindset at this time.

Joanne is very interesting. She seems to be doing things the "right way round". Submitting a proposal and then negotiating with the client, albeit suffering heavy losses during negotiation.

I see two outliers here which could challenge the credibility of the data. Joanne is navigating the topic of discounting differently, and Lucinda seems to be discounting and therefore discussing price very early on. Ironing out these outliers and aligning to ensure all salespeople are in agreement as to the sales processes steps is fundamental to the success of future analysis.

Step 3 - Identify the Problems

The striking observation in this scenario is that discounting is largely taking place when proposals are being submitted.

Potential problems:

1. Proposals are focusing more on price than solutions to problems
2. Salespeople feel threatened by competition and therefore feel "compelled" to offer discounts
3. This is a price driven commoditised market
4. Legacy - a prominent peer may once have worked this way and this has filtered through over the months and years
5. Something as daft as displaying a "discount" section on standard proposal documents

Whatever the underlying problem, speaking to your team and contrasting their ways of working will help you get to the bottom of exactly why discounting is happening in this way.

Step 4 - Remedies

We may then want to look at how any of the following could bear an impact or help our situation.

1. Sales Enablement Tools
2. Marketing Content
3. Sales Approach / Value Proposition / Urgency Stories
4. Objection Coaching / Shadowing
5. Data Enrichment
6. Pricing

Step 5 - Results

My favourite bit and the reason we're trying to do this in the first place! Pretty straight forward this one, if we lessen our average discount at our most common stage (proposal) then how does this affect a) our Average Deal Value and b) Revenue! Remember, we've got £270k to try and build on.

So, suppose we improve the -£1,200 to -£900 at Proposal stage, we gain £300 per deal. In the case of ReachOut&ToucBase.io, who now close 27 deals a month thanks to our funnel conversion and stage tenancy work, that's an extra £8,100!

This now means that our metrics series has taken ReachOutandTouchBase.io from £200k per month to £278,100. Not to be sniffed at.

Summary

We've now pulled on the Value lever, having previously impacted velocity and volume. Spotting discounting is a fantastic opportunity to really get into the nitty gritty of your salespeople's experiences on the front line. Getting the data behind this however, is where we can identify the specific areas of difficulty and prove that our coaching and enablement tactics are hitting home.