3 Rules for Creating Discount Offers that Work

3 Rules for Creating
Discount Oﬀers that Work
by SaaS Pricing expert and Growth Hacker
Lincoln Murphy of Sixteen Ventures

Discounts are Generally Bad
• When it comes to SaaS pricing, discounts are both awful and
awesome.
• Unfortunately (or not), we just don’t live in a world of absolutes.
• Generally, I like to avoid discounts because the way they’re done
most of the time will devalue your oﬀering in the eyes of the
customer.
• And that’s because most of the time, discounts are a cop out. It’s
just easier to lower the price than to do the work necessary to sell
at full price (or even higher).
Copyright© 2014 Lincoln Murphy. All Rights Reserved.

1. Price Objections are Value Objections
• If someone objects to your price, yet they have the means to pay it
(i.e. no matter how much I understand the value of a Bugatti Veyron, I
can’t pay $2.5M for a car), then it’s not the price they’re objecting to.
• Rather, it’s that they don’t think your oﬀering is WORTH the price
you’re asking.
• The value they perceive simply does not match the price you are
asking.

• You can either lower the price permanently or in the form a
discount, and maybe get people who originally objected to
your oﬀering to pay (while calling you a sucker and thinking of
other ways to rip you oﬀ or waiting for a more valuable
solution to come along)…

• Or you can work harder to raise the value perception of your
service to match the price you’re asking.
• Amateurs do the other one… pros do this one!

• This presentation is based on my popular “SaaS
Pricing: 3 Rules for Discounts that Work” post... you
can ﬁnd a lot more detail on the techniques and ideas
presented here including a 35-Minute Video
Presentation on Value Pricing:
• http://sixteenventures.com/saas-pricing-discounts
• The presentation really gets good on the next slide ☞
Presentation Source

2. Discounts should get ‘em to pay more... not less
• Sometimes discounts are cool, like when you can get people who
convert to pay you MORE than they were originally going to… by
oﬀering a discount.
• If someone self-selects the $50/mo plan when they start your trial,
or if their usage during an unlimited trial or trial not tied to a
pricing tier indicates they should select the $50/mo plan, what can
we do to get them to convert at, say, $75/mo instead of $50/mo?
• Well, we could take the next tier up – $100/mo – and give them
that tier for ONLY $75/mo. We could do that forever (until they
upgrade/downgrade/cancel – a good reason to not cancel,
especially if the price has gone up even more later) or for a limited
time, like 6-months.
Copyright© 2014 Lincoln Murphy. All Rights Reserved. http://sixteenventures.com/

2. Discounts should get ‘em to pay more... not less
• Either way, that could be a mighty enticing offer,
especially if triggered based on their actual
usage during the trial (i.e. once they complete
the CCAs, make them the offer… I like to use
One Time Offers that will never be available
again).
• This is how we took one client’s time from sign-
up to conversion on a 30-day Free Trial to just 3
days (you read that right) AND increased
Average Subscription Value (ASV) by 33%.

3. To be really effective, discounts require scarcity
• Whether that scarcity is the amount of time the discount is available,
the number of discount subscriptions available, etc. it needs to be
there.
• This is both a customer-facing issue… but also internal.
• Externally, if you don’t put some bookends on the oﬀer, it looks like
you’re just discounting your product for no reason (or, several reasons
like your product sucks, you don’t value it, you’re desperate, you
don’t know how to market your product, you’re a sucker, etc.).
• Scarcity also gets people to take action… no scarcity, no sense of
urgency to take the oﬀer.
• If you’re using the discount the way I describe in #2 above and
growing LTV by 50% on each transaction, you’re good… time to step
on the gas!

A Note on Discounts in Enterprise SaaS Deals
• Just so we’re clear… discounting in an Enterprise deal is
common, but you generally start from a much-higher price than
the “retail” pricing on your marketing site.
• Plus, discounting is generally done behind-the-scenes, one-oﬀ
for each client, under NDA, etc. and therefore doesn’t have the
same negative eﬀect as plastering huge discounts all over your
marketing site might have.
• Plus, you generally trade the discount for a logo, right? Quid
pro quo, am I right? You did that, right?

A Note on Discounts in Enterprise SaaS Deals
• Also, in many Enterprise SaaS deals, long-term contracts are
the norm, and generally they allow for expansion revenue
possibilities by locking in the rates of add-ons, higher pricing
tiers, etc.
• And just in case you’re thinking “Who cares about contracts,
this is SaaS!” just know that contracts are required in many
market segments with certain types of customers and you
probably aren’t in a position to change that yet.

Presentation Source
• This presentation is based on my popular “SaaS
Pricing: 3 Rules for Discounts that Work” post... you
can ﬁnd a lot more detail on the techniques and ideas
presented here including a 35-Minute Video
Presentation on Value Pricing:
• http://sixteenventures.com/saas-pricing-discounts

Thank You!
• Lincoln Murphy
• Sixteen Ventures
• lincoln@sixteenventures.com
• http://sixteenventures.com
• @lincolnmurphy

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