Create a discount framework – and stick to it
Most B2B companies offer discounts. Fewer control them. Discounts often start as strategic tools but quickly become habits, exceptions, or negotiation defaults. Over time, they erode margin, create customer inequality, and confuse the market.
This is article 3 in our series Pricing Insights, focused on building structures that protect your value while supporting sales.
Why discounts need governance
Without clear rules, discounts become:
Inconsistent across similar customers.
Disconnected from value or deal size.
Vulnerable to emotional decisions and sales pressure.
Difficult to track and explain internally or externally.
A discount framework brings clarity, fairness, and control. It helps your sales team act with confidence while preserving profitability.
Core principles of discount governance
Define the floor
Set a minimum acceptable price or margin by segment or product. Below this level, deals must be escalated or blocked. Your floor is not arbitrary – it's based on cost, value, and strategic positioning.Establish approval levels
Decide who can approve what level of discount. For example:0–5%: Sales manager.
6–10%: Sales director or finance.
10%: C-level or Pricing Committee.
Link to segmentation
Not all customers deserve the same discount logic. Strategic accounts may warrant more flexibility. Long-tail customers may follow stricter rules. Tie discounts to value and relationship.Require justification
Every exception should have a business reason: competitive match, volume commitment, strategic entry. Track and review them regularly.Document it
Build a simple, one-pager that explains rules, roles, escalation paths, and examples. Make it visible and easy to use.
Tracking and enforcement
Set up dashboards to monitor average discount per segment, by salesperson, by region.
Flag outliers automatically.
Share results in monthly or quarterly forums.
Reward good discipline.
Annual cleanup = direct impact on profit
Every year that goes by with legacy discounts untouched is a year of margin leakage. Annual reviews help:
Identify expired deals still on preferred pricing.
Detect customers who receive discounts without justification.
Align pricing with current cost and value realities.
Removing unnecessary discounts has a powerful effect on profitability. Here's a simple example:
Imagine a company with €100 million in revenue and 15% EBITDA margin (€15M profit). Reducing average discounts by 2% increases effective revenue by €2 million. Since this comes with minimal cost, that €2M flows almost entirely to profit – boosting EBITDA from €15M to €17M. That’s a 13% profit increase. In companies valued at 10x EBITDA, this means millions in additional enterprise value – simply by cleaning up old, unjustified discounts.
No one wins from excessive discounts:
Customers want a stable, reliable partner that invests in quality and won’t disappear due to poor margins.
Sales teams want to hit their targets without giving away value.
Owners and boards want strong, growing valuation and healthy profitability.
Discount discipline aligns everyone around value, not volume.
This type of disciplined pricing hygiene compounds year over year. The impact isn't just on one deal, or one region – it’s systemic, scalable, and deeply measurable.
Make it cultural
Discount discipline isn’t just process – it’s mindset. Reinforce value in sales training. Celebrate full-price deals. Position discount restraint as a mark of professionalism, not limitation.
Encourage sales leaders to talk about pricing strategy openly. Provide regular feedback. Integrate pricing performance into sales KPIs and variable compensation. Make value selling part of onboarding.
Real-world example
A B2B tech firm implemented a clear discount policy and cut average discounts from 14% to 8% in one year. That change alone boosted gross margin by over 4 points. Sales teams reported higher confidence in price conversations, and finance reported fewer manual overrides. Over a 3-year period, they connected this improvement to a 28% increase in company valuation.
Common mistakes to avoid
No tracking. If you can't see your discounts, you can't control them.
Overcomplicated rules. Keep your framework simple, visual, and actionable.
Allowing exceptions to become new norms. Guard your standards.
Letting discount size define success. Bigger deals aren't always better if margin disappears.
Tips for implementation
Start with one product group or region.
Pilot the framework with a trusted sales manager.
Communicate clearly: not just what changes, but why.
Review results monthly and adjust rules quarterly if needed.
Set a yearly “discount review month” tied to budget planning.
Final word: consistency builds credibility
When discounts follow logic, customers respect them. When they feel random, customers push harder. A strong discount framework builds trust, protects value, and drives sustainable profitability.
Over time, this consistency doesn’t just improve margin – it builds a reputation. Investors, customers, and employees all benefit when pricing is principled and predictable.
Author: "Mr Pricing", Tobias Murray, CEO and Co-founder at VAERG vaerg.com
About the author. Tobias Murray helps B2B companies turn pricing into a scalable growth engine. With long-standing experience across industries, he specializes in structured, data-driven pricing strategies that consistently deliver 10–25% EBITDA uplift. As CEO of VAERG, he and his team transform fragmented pricing into a systematic, value-generating discipline.