Whether or not and how much to discount in B2B SaaS is often a question we are faced with when working with clients. Discounting is often seen as a threat to revenue growth, but when used strategically, it can be a powerful driver of it.
There are two main types of discounting: structural and discretionary.
Structural Discounting
Structural discounting is part of the pricing model, whether it be an explicit bundle discount, term-length, or volume-based discount. These are discounts that happen according to specific rules and apply equally to all customers who satisfy those conditions. Customers should have this discount communicated to them as something they are receiving (although this may not always be the case), we recommend that it is communicated.
Discretionary Discounting
Discretionary discounting is instead given based on the discretion of the sales rep or other internal decision-makers. Discretionary discounts well deployed, can close competitive deals and incentivize customers to upgrade functionality and become stickier over time. In order to capture the most value of these discounting dollars, we have advice on how to build functionality for strategic discretionary discounting (spoiler: it shouldn’t be fully discretionary).
Discounting must be structured, and teams need authority. A deal desk can help with reviewing discounting requests that come in over guidance. A discount is easy to give, but it is difficult to take away; high discounting to close a deal can result in long-term revenue leakage. This is where the importance of data-driven discount guidance steps in. Providing sales teams with granular guidance will speed up the sales process and stop value leakage. A simple “AEs can discount up to 5% without approval” does not satisfy this. Discount guidance should be tailored, splitting up customers by product line, deal size, term length, or segment to reflect actual commercial dynamics.
The path to this discount on the customer side should not be easy. With any discounting, the give/get is critical. If we are giving a discretionary discount, that should result in longer term lengths. If the customer is purchasing an add-on, perhaps offering the discount on just the add-on portion of the deal may work.
A strong pricing model must closely tie to a customer’s perceived value of the product. While well-structured pricing models offer a set of features that map to the majority of customer needs, they are not a catch-all. Discretion will always be needed in competitive or complex deals, and that discretion should be supported, not improvised.
Pricing committees can be used as an escalation point to ensure that discounting guidance is being followed. Importantly, a 5% change in average discounting can have a disproportionate impact on profitability, especially if you are retaining customers. The downstream impact of poorly governed discounting can be significant, especially in high-gross-margin SaaS businesses.
Give and Get Dynamics
We all know that negotiations will involve back-and-forth, but the path to sustainable discounting requires discipline. Strategic discounting must be governed by a clear “give/get” framework: for every commercial concession offered, the seller must get something meaningful in return.
G – Ground rules in place: Strategic discounting starts with structure – defined thresholds, approval paths, and deal desk support.
I – Incentives aligned: Ensure sales incentives and quota structures don’t conflict with discounting goals. You can’t control behavior without aligning comp.
V – Visibility: Internal visibility to discounting behaviors can lead to refinement and improvement of discounting policy over time.
E – Exceptions reviewed: Exceptions can happen, but they should be rare, recorded, and reviewed post-mortem for learnings.
G – Guaranteed commitment: Discounting should secure firm commercial commitments—multi-year terms, minimum spend thresholds, or clear usage floors. This de-risks the deal and anchors predictable revenue.
E – Expansion-enablement: The discount should be structured to unlock growth through bundling, cross-product adoption, or faster onboarding. You’re not just discounting dollars; you’re exchanging them for a deeper footprint and future upsell potential.
T – Time-bound: Discounts should be limited in duration, i.e., expire after X months, be set to renew at full price, or taper down over the duration of the contract.
Final Thought
Discretionary discounting is not inherently bad, but left unmanaged, it can erode your pricing strategy and confuse your value story. With structure, strategic intent, and clear give/get expectations, it can become a lever for growth, not just a lever for closing.
