Choosing the discount size in the software industry: How to incentivise the salesforce

Abstract

Despite the importance of pricing strategies in B2B sales, previous studies have devoted scarce attention to discount strategies. Drawing on anchoring theory and employing a mixed-method sequential research design (i.e., two experiments and a qualitative study), we explore whether previous discount information (i.e., a reference discount) of a B2B salesperson influences the decision about the amount of discount granted to a new customer. We also examine the role of incentives in this relationship. The findings show the importance of reference discounts in determining the discount level given to a new customer. Specifically, salespeople's incentives reduce this effect. Our qualitative efforts demonstrate that uncertainty reduction and self-interest are the main reasons behind reliance on reference discounts and the efficacy of incentives, respectively. The findings of this research highlight the consequential impacts of salespeople's past knowledge and monetary incentives on determining the discount level.