Discount is not a birthright — in fact, it may even be counterproductive
By: Jesal Doshi
Tags: Negotiators, Bargaining, Mindset, Discount, India

Discount is not a birthright — in fact, it may even be counterproductive Jesal Doshi May 18·3 min read

As I was going through a battery of tests sitting within the four corners of my room for 2 weeks; a thought lingered on…

When I did the first test, the test lab handed me a “discount structure”, the more tests I do, the higher the discount I get.

At first, I thought this was a rather innovative business model. But it didn’t take me long to realize that this was not innovative at all — all the labs offered this. And then the realization hit, customers are simply so used to asking for discounts; that they adopted this model.

And then when you think about it, the mindset of asking for a discount is simply ingrained and part of our DNA — starting from when we buy sabzis from the roadside sabziwalla, to medical tests, to medicines, to even when we buy a 5 crore car.

In business, I have seen so many leaders pride themselves on their ability to negotiate — some of India’s largest behemoths have built their reputation on this. Even in my own organization, when I talk to my procurement team; the first reaction is “Sir, don’t worry. This is the first non negotiated price. We will ask them for a no regret price”.

It led me to wonder — are we really excellent negotiators or have we simply grown up assuming that a deal without any negotiation is simply a bad deal, and thus perhaps deceiving ourselves and everyone else about our profound skills as a negotiator?

So I decided to do a small exercise:

When it came to my personal life, I simply stopped asking for discounts. Maybe I am losing money but the folks I regularly buy from do realize the difference between a no fuss buyer and a haggler. I’m sure to get the best quality. This made me realize that we underestimate the seller — a discount is not necessarily a good deal, more likely not. You spend more time and effort, and you likely end with the same deal that you would have got otherwise. And when you get friendly enough, you realice that the sellers change pricing and quality based on their assessment of the buyer. So, if they perceive you as a haggler, they will give you the lower quality / older perishable items / start with an inflated price. Professionally, it has been a lot more difficult to implement this. We have customers who we know will negotiate and therefore we start with a higher price to do the “song and dance”. I’m sure that our suppliers do this to us, and in a way this is a self fulfilling prophecy to show our “value”. It is simply an accepted way of doing business.

Nevertheless, I strongly believe that a sustainable long term business relationship is based on mutual trust. As an organization, we are trying to rid ourselves of this perennial discount structure and focus on delivering quality. Time will show whether this approach will succeed — perhaps we will fail, and even miserably at that.

For now, I have realized albeit at a personal level that a discount is not a birthright. In fact, it turns out to be counterproductive most of the times. I know that there are people who disagree with me, including in my own family. Change is never easy, and attitudinal change is even more difficult, and happens over generations.

But I firmly believe that we need to focus on quality, reliability and not just discount and price.