What do automotive dealers, software companies and the owners of a Dalmatian dog all have in common? – they’ve all been responsible for conditioning.
Loki the Dalmatian isn’t the easiest dog in the world – he loves people, but other dogs not so much. So every time he goes on a walk, when finding ourselves approaching a blind corner, we ply him with treats. The apprehension of what might be lurking around the corner means that he gets called over, put on the lead and given a treat before we get to the trouble spot (pardon the pun). This behaviour is now so engrained that he actively comes up to us just prior to the danger point on the walk, licking his lips before we’ve even called him!
This ethos can be applied in a similar way to end of quarter software discounting (timely, I know as a lot of software companies will have just finished their end of quarter). About twelve years ago I was at a conference where an executive from an ERP (Enterprise Resource Planning) company lamented the fact that 85% of their sales occurred within the last 48 hours of a quarter. Talking with a friend of mine last week who’s still in the industry, I can confirm that the phenomena is still alive and well. Traditionally it’s the end of the quarter when expected customer discounts are at their largest. The possible disconnect between a manager’s target and how their salespeople are incentivised may also prove a problem here – but that’s a topic for another day!
Of course, automotive dealers are also famed for the ability to offer large discounts just before a new vehicle model is introduced to clear out the old (new) stock. All dealers that is, except Tesla – Elon Musk was reported as saying a few years ago that Tesla operated a “no negotiation and no discount policy”. This is unless it seems (as reported back in August), you live in China and meet certain criteria. In this case you can replace ‘Customer Loyalty Programme’ with ‘Discount Scheme’. As a customer in China, if you wish to upgrade to a new vehicle, you'll be enticed with a number of exclusive offers (Elon Musk seems to be continuing to court the Chinese in other ways if you check his recent tweets about China and Taiwan…).
My point is that all these examples create precedent, and potentially the unwanted conditioning that comes with it, which can be hard to shift. Whilst we can try to get the other side to go cold turkey – withdrawing the treat, this can lead to consequences (whether cocktail sausage or discount!). Look back at your planning and make an objective, dispassionate assessment of the implications – what’s the possible effect on the bottom line, how easy is it for them to switch to a competitor and what are the personalities involved like?
It's also worth thinking about value. Are the items or requests that have been made of us in the past outside the main issues we're concerned with? What value might these items have to this prospective client? If the value of these is higher than a discount, could I use the item to secure a deal earlier in the quarter? Who knows, it might even generate some additional ‘stickiness’ – dog slobber of course doesn’t count!
If this is an area where you’d like to know more, you can sign up to receive a Savage Macbeth insight entitled ‘4 Ways to Create more value not more discounts’ here.
Sam Macbeth, 11th October 2022
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