Author: Mikkel Plæhn

Before we recorded this episode of our podcast The Revenue Formula, I discovered something.

It’s called Bravado, and it’s an anonymous sales community. 

As you can imagine, the conversation is very… direct.

The first thing I looked at was marketing (that was a mistake), but then I stumbled upon a post about sales enablement:

“the title is basically, sales enablement sucks and they’re a bunch of fake teachers. 

First paragraph is something like: I feel like sales enablement doesn’t know what they’re talking about 95% of the time.

They either have never sold, have little to no experience in sales, or they sold for six months, five years ago. (…)

What annoys me is that on top of offering zero value, they’re the ones annoyed when I am the one doing all the busy work, instead of focusing on what really matters. Lastly, they don’t do anything but talk about adding decks and saying hi to new hires. 

They’re even worse than marketing.” (02:32)

Wow! That was kinda crazy considering sales enablement is there to help. 

To top it off, it was followed up by this poll

So our aim with the episode we recorded (and this article) is to help make sales enablement useful.

What is sales enablement

But first, are we actually clear about what sales enablement really is?

Sales enablement is the process of equipping sales teams with the necessary resources, tools, and information to engage with customers and close deals. The goal of sales enablement is to streamline the sales process, improve sales productivity and effectiveness, and ultimately increase revenue.

And as Toni puts it:

“Generally speaking, you start thinking about sales enablement once you listen to your sales reps and are like, why is she pitching that? What is going on in my sales team?” (04:17)

But what’s the goal?: “it’s about sales efficiency, right? So you wanna basically make sure that people are trained on the best practices for your company in terms of how to pitch. Obviously, which deck to use is also in there.”

“Which questions to ask, which objections to be prepared for, and what competitors to have in mind and so forth. There’s a lot of stuff that needs to happen and needs to land in someone’s brain. 

And the problem is when you have 10 AEs and a sales manager, you’re basically gonna run into this issue of the sales manager being really busy, closing all the deals, versus onboarding and teaching and doing all of that stuff with your sales reps. And you know, if you don’t do that, then you end up in this [bravado situation].” (04:30)

What next level sales enablement looks like

In spite of what anyone over at Bravado says, sales enablement is important for a couple of reasons.

You want to a) ramp reps, b) train reps, c) retain reps – all to impact revenue. This involves ongoing training, coaching, improving sales performance and much more.

“Instead of just making this a sales enablement piece, it should be a revenue piece.” (09:14)

And that’s exactly the mindset we tried to carry as we discussed what elements are key to ultimately impact revenue.

Ongoing training

As the market and product evolve, it’s essential to keep training your sales team and supplying them with not only material, but an approach.

“Then you have an ongoing flavour to it around the training, ongoing, product training, ongoing competitor training, which is simply necessary due to the fact that your product is evolving, the market is evolving.” (09:55)

And if you have an ongoing approach, what will happen next is this: “I’ve heard a lot of reps basically say this makes me a little bit happier in my role” (10:19)

Maybe that’s a small step to start patching the relationship. But think back to the revenue impact. If you’re unable to articulate the value of new features, or tackle new objections, you’ll be less efficient in your sales approach.

“So let’s just say either you are rolling out MEDDIC or MEDPICK, or you know, some of those concepts. So to reinforce that it’s being lived and breathed.

So, and this is actually where we’re starting to get into like, but wait a minute, isn’t that like a sales manager, sales director kind of responsibility – and it is. But you know, this is one of the areas that I would say it’s shared” (10:49)

Listen to calls, obviously?

We can read the deal history in any CRM, we can see the conversations and listen to the calls. But you need to go a step further.

“if their main medium of receiving information is Gong or other versions of that (…) try and make one little tweak, try and make them jump on actual sales calls, live. Introduce them. And have them participate in that pitch and not necessarily lead it.” (28:09)

The pressure will instantly shift. When going from passive to active participation, things change. If you need to use the deck you created, or tackle the objection you’re training a team on – things are just very different.

“when you’re in it versus you’re just listening to the radio, a lot of more things will pop up in their brain like: this is broken, this is broken.” (28:44)

And the beautiful part, the reps will trust you more:

“They got the same reality check I got. Now I can trust your output a little bit more because I know now we are a little bit closer aligned than you sitting in theory land” (29:17)

And last but not least, you’ll be much more in tune with the reality the sales team face on every call.

Onboarding and training:

If you can ramp a rep faster, that’s a major efficiency gain in your performance. However, it can also be a drain if it takes longer to get new team members successfully out of ramp.

“If someone has been in Salesforce once and then in Salesforce again, sure. That’s doable. But think about Salesloft and Outreach for the SDRs, that’s very complicated and having lots of new folks joining who haven’t dealt with those tools before, think about all of those data tools that you might have, Zoom, Cognism and so forth.

There’s a lot of that stuff that needs to be taught and understood.” (12:27)

There’s a lot to cover in onboarding, and everyone will be at different stages in their experience. That’s why sales enablement has to have a clear plan to successfully onboard new team members fast.

And as Toni points out: “if you have the luxury to specialize your sales enablement team (…) then the way to go about it is for the onboarding and ongoing training on product and on the sales methodology” to be carried by one person (13:15).

Coaching

Another area where many struggle, simply because  “who earned the right to do the coaching?” (15:45).

And the problem really is a result of not hiring the caliber needed to successfully coach the team. While the sales manager should definitely be coaching, there’s just a limit to how much coaching that person can do while managing a team and closing deals.

So why aren’t you getting the right people?

Well simply put, “you don’t have a competitive package at all, usually a terrible package. Usually it doesn’t carry any prestige.” (17:32)

“which then leads to something that I call negative selection. So who goes for that role? Yeah. It’s reps that aren’t successful in the first place.”

Who would wan’t sales coaching from someone who wasn’t successful in selling? You’ve guessed it. No one.

So how do you create a scenario where there’s a good coach that reps actually seek out for advice?

“What Gartner’s actually doing, they are offering their best sales reps to become a coach for a year. And they’re basically paying them, the OTE that they hit, last year.” (18:15)

What’s great about this scenario is that reps will actually want help from that person. And think about this:

“because of the competitive setup of those plans, because of this clear deal ownership thing, because (…) there can only be $1 paid for $1 earned, so to speak. Not multiple times. It’s like, well, if someone wants to help you on your deal, you usually need to, depending on the help, you need to kind of give some percentage up.

So what happens? It doesn’t happen, and the only person helping you is your manager.

And that manager probably is busy with all the other stuff going on. So now you introduce that sales enablement person, suddenly it becomes like an awesome free resource. Do I need to share my deal with that person? No. I’ll take it.” (20:29)

And as Toni puts it, in this scenario you have “a sales enablement function on steroids” (21:50)

There’s just one caveat, “you will have someone running around doing that stuff that’s being paid $250,000 a year (…) And you need to be prepared for that number.” (21:57)

Performance improvement plans

Being put on a performance improvement plan (PIP) is in many companies the mark of death.

“It’s kind of common practice that after some underperformance of a rep, you put them on a pip, you know, performance improvement plan. And in many cases, this is just the heads up, we’re gonna fire you in two months” (29:58)

But in an ideal scenario, you consider investing resources in actually improving performance (provided that’s the issue). The simple reason being: You’ll have a very concrete gap in your team. If it’s an SDR, you’ll get fewer opportunities and in effect create a gap. If it’s an account executive, you’ll distribute more deals – but your closing capacity doesn’t change. Meaning: Sales efficiency will drop.

“I think with good sales enablement, you can actually create a bit of a stronger case for improvement. You put someone on a PIP, and then you’re paired with resources.” (30:26)

“if you don’t give them any help, neither from the manager, because the manager in many cases is like, yeah, this is kind of wasted time. Now I’m gonna spend my time with my high performing reps instead. Then you’re creating the self-fulfilling prophecy.” (31:11)

Want more of this?: Check out our podcast here.

We’re wired to ask for discounts. 

I once read a book encouraging the reader to ask for a discount on the next Starbucks coffee. If asked why, they suggested replying “just because”.

Chances are, you’ll get a discount. Maybe not the first time, but eventually.

And that’s a problem for the seller, and in some cases also the buyer.

When talking about SaaS, quite rarely is budget the problem. And if budget is the problem, most likely, no one will end up being happy.

Ultimately, the customer wants to get the best price. But what if you can give everyone comfort knowing that they got the best price?

Well you can, and you’ll grow faster for it. To do it, you need to stop discounting your subscriptions.

I get that removing discounts is controversial, it’s an established practice. We feel that it helps us push a deal over the line.

But bear with me for a second. 

In this article I’ll run you through the problems and benefits of removing discounts. I’ll also share how to remove discounts – or rather, how you can limit them to reap the benefits.

The article is based on a recent podcast episode of the revenue formula, so if you prefer you can listen right here.

The problem with discounts

Most articles you’ll read cover how to use discounts. How you’ll get more revenue.

But very few talk about the power of removing discounts, let alone the problems they create.

There are three areas we’ll jump into: 

1. How it attracts the wrong customers

2. How it lowers LTV while increasing churn  

3. How it breaks when having a sales incentive structure

1. Not your loyal customers

I’ve seen it before. When pulling a cohort of discounted customers, guess what they all had in common? A lower ACV and higher churn. Ugh.

They’re less loyal and more price sensitive. Needless to say, this will have an impact on your growth.

Now surely, if they want to buy it and we’re okay supplying it at a lower cost – what is really the downside?

But there’s a much bigger problem. 

2. Lower LTV and higher churn

Because of discounts, you’ll lower your LTV. You’ll start to see an increasing CAC:PB, which leads to having fewer $ to acquire a customer.

Think of it this way:

“Imagine the impact of 20% churn on your business… well if you give a 20% discount you just churned 20%!.”

Jacco Van Der Kooij

So it’s basically the same thing as churn. But if it’s like churn, then…

“It has the same impact on your CAC payback. It has the same impact on your lifetime value. It has the same impact on your growth. All of these things are the exact same thing, but you know, for many reasons.

And some of that is obviously investor sided, 20% churn feels so much more hurtful than giving a 20% discount.” (08:21)

To make matters worse, discounting impacts your LTV directly.

“And this is actually another thing from Patrick Campbell at Price Intelligently. So basically they’re saying, discounting lowers the LTV of a customer by more than 30%.

And now you think like well, wow, isn’t more than 30% kind of a large discount to have on average? Well, the problem is actually twofold, it compounds. It’s not only that you give maybe 20-25% discount, it’s also that the customer by itself will be more likely to churn.

So if you kind of combine both of these effects, you basically get to a larger than 30-35% reduction of lifetime value.” (10:49)

And just another point not to ignore, what happens when a customer is up for renewal? Well… 

“On the renewal side of things, once you open the door for a negotiation on the new biz side, you kind of implicitly also open the door on that negotiation on the renewal side”. (10:57)

When incentives go wrong and urgency reverse

Potential customers will plan the negotiation. And just like a sales rep can use urgency – so can the buyer.

Have your reps ever been asked “when is your quarter ending?” Take this example as a cautionary tale:

“When I bought Salesforce a couple of years ago, what I did there on purpose was basically… I started the conversation in the first week of January.

And what maybe some listeners don’t know is that Salesforce year end is on January 31st, so basically the sales rep that I was reaching out to was incredibly lucky.

It ended up being a three year deal, more than $300,000, you know, it was a big thing even for the size that we were at that point, still it was a big thing for the rep.

He didn’t have time to go through all of those negotiation steps. He needed to get this deal closed in a month from now or less than that.

So basically, his only choice was skipping some discounting steps, going further down, much quicker. And basically we were capitalizing on this exact problem where the counterpart, they have a deadline. (…)

And again, does it really matter for the business whether or not that deal closes on the 31st of January or the 1st of February?. It doesn’t really matter all that much, but it matters for that salesperson. So therefore that salesperson will be incredibly incentivized to give you this discount, Right?” (21:02)

What’s happening is two things:
1) The incentive (on target earnings) has a negative impact on behavior. Rather than closing the deal next quarter at a high ACV, the incentive gets the rep to close the deal fast.

2) They will use all their negotiating power internally to push for a discount. The incentive creates urgency for the rep to close the deal and use discounts to do so.

So discounts are not really helping.

Wait.. Won’t discounts increase overall win rates?

Case in point:

There is no research to support that revenue will increase, we have at least yet to find it. While it might help individual sales reps in some cases, it will be at the sacrifice of long term revenue growth as we illustrated with the Salesforce example.

The benefits of removing discounts

Everyone wants to decrease churn, increase LTV and maximize the organization’s revenue potential. 

If discounts are a way to do that, what are the benefits? Let’s dive in.

You’ll get a faster sales cycle

Don’t underestimate the importance of velocity, ie. the amount of deals one account executive can turn over. If it takes a year to turn over one deal, that’s one deal per year. If it takes a month? 12. 

In other words, velocity is a major efficiency driver you need to pay attention to, and removing discounts actually decreases the sales cycle by sometimes 2-3 weeks.

“So why is that? Well, if you think about whatever you’re selling, there is even a stage in your Salesforce or a HubSpot pipeline that’s called negotiation” (15:10)

Take this real example Toni shared:

“We already decided that we were gonna buy Chili Piper because we needed it. And it was not like, ooh, you know, this $1-$2,000 more, that’s gonna break the deal. That was honestly not what this was about. And, I talked to my RevOps guy and he was like, Toni, they don’t give any discount.

First reaction, I laugh. First reaction. Yeah. Yeah. Sure. They don’t give any discount. 

And by the way, this was not a junior RevOps guy. And he was looking at me with dead, honesty and certainty, and he’s like, Toni, they do not give any discounts.

And then I stopped laughing, and I paused, and then I was like, well, um, well then let’s just sign the deal now.

And the thing is what are you gonna do? Are you gonna waste another two, three weeks and push something that you won’t get anything for?

The effect that it has, instead of you playing this game for two or three weeks longer, basically the other side is like, okay, we don’t need to, we can’t play that game, so let’s close it right now. And there you go. You have like saved two, three weeks of your sales cycle, right?” (16:55)

To make it even more interesting, Chili Piper wrote about their no discount approach right here.

Growing faster

It’s kinda obvious. If you don’t do the average 15% discount, you’ll have that cash and can reinvest it. It’ll give you some clear advantages:

“That translates both into the ads you can run on Google and Facebook, but also on the quality of sales reps you can hire, the support you can give and all of these, all of these other things around it, which basically gives you a competitive edge.

So really, the more CAC I can afford because the price is higher because of more funding in the bank account, the more competitive and aggressive I can go.” (09:49)

Think of it this way, if you’re in a competitive market, being able to afford a higher CAC means you can hire better reps and buy more customers through marketing than they can.

So.. we just.. Remove discounts?

This will be very difficult. If there’s already an established practice, getting rid of discounts requires the CEO to get involved.

But, there are alternatives – we shared two alternatives in the episode: Pricing tiers & vanishing discounts.

Pricing tiers

A major factor here is your pricing and packaging. Using different tiers can help you change the conversation when it comes to the price.

“If you want a 20% discount, it’s no issue. You just then buy this other level, this other tier here.

I think that conversation, sometimes it’s really painful for the buyer. Because then they’re like, Ah, no, but I want this other thing. And it’s like, well, if you want the other thing, you need to pay for that. So this is sometimes a good conversation”. (24:39)

Nailing pricing is not easy, and there’s a reason that companies who review pricing yearly has a more solid foundation for growth. 

While increasing price 1% is more effective than increasing retention or win rates 1% (see previous link), reviewing price can help you change the conversation into what solution the customer needs rather than how cheap it can be sold for.

Vanishing discounts

Another option is providing non-recurring discounts. And when it’s time for renewal? They’re gone.

There are a couple of reasons this makes sense as an option

“When you buy a new tool, you always have this, oh, damn, I need to roll this out now, I won’t be able to use it for two, three months. And then there will be some bug and some things won’t work.” (25:29)

Buying a tool requires not only a monetary investment for the customer. They need to spend time implementing, training and refining. That brings with it a lot of risk.

A one-off discount can help alleviate some of that pain. Companies like HubSpot have historically charged for training, onboarding and implementation – separate from the subscription.

Doing so makes it by default a one-off discount if they waive those fees.

“Arguably your value for the first year probably is less than the following years, and you can almost think like you add that amount of rollout work on top of the price” (25:44)

Interested in more? Check out the full episode on Spotify, iTunes or Youtube (video).