Avoid Loss Leaders

A new topic from a coaching session: Do I go into tenders aggressively and write offers for new customers with big discounts to get the project? This is the tactic of so-called Loss Leaders. See in the new VLOG why I recommend against it at the beginning of a customer relationship.

Hello dear managing directors, dear sales leaders, account managers, B2B sales people.

I had a coaching session yesterday where we had quite an interesting topic. And that was the question, is it a good idea to offer something at a discount early on to get the deal so that you can make your money afterwards? Now, that is quite a common approach. It is the so-called loss leader approach that many companies use to get a client, or to get access to the market.

I would strictly recommend not to follow this approach for various reasons. The first one is, once you have created a price expectation, it is very difficult to get higher prices in the future. Secondly, the bigger the deal, the bigger the risk. And you will probably if you go in with an aggressive pricing, identify more and more risk. And it will be virtually impossible to cover all these risks and to recoup your investment. And number three, you are normally hoping for change request.

And the bigger the pressure, the more change requests are going to be needed to make money on that deal. And there is always a fine line between a change request, or asking for a change request and working on your customer relationship. And the more you try to provoke change requests by over interpreting for example the contract and having a specific contract manager or a dedicated contract manager on that project, the more that you are going to jeopardize your customer relationship.

So, do not go for loss leaders. I would not recommend it. You would rather combine it in a package so that you say that you are for example offering a first step at a discount. And then go. And if you are then going to be asked to go to step two, you are going to charge your normal prices. So, that might be one way of finding compromise, but avoid the loss leaders. This was Armin Rau from Armin L Rau - Opening doors, making you grow.

If you have got a specific challenge in tenders or in your B2B sales processes, click on the button underneath this video and book a free session with me. Rest assured that any of our discussions would be held in strictest confidence. I am looking forward to speaking with you.