Discount Governance

Without governance, discounts become a negotiation reflex. A rep faces pressure, offers 10%. The buyer pushes, it becomes 15%. The quarter is ending, it becomes 20%. Nobody tracks the cumulative impact because each deal is approved in isolation. But isolation is the problem — each discount decision compounds into a pattern that erodes gross margin across the entire book of business. Discount governance is not about saying "no." It is about making the true cost visible before the decision is made.

1. Tiered Approval Authority Define discount tiers with escalating approval: 0-10% at rep discretion (with justification logged), 10-20% requires sales manager approval, 20-30% requires VP approval with margin impact analysis, 30%+ requires executive approval with strategic justification. The tier structure forces escalation as the margin damage increases.
2. Mandatory Margin Impact Documentation Every discount request above 10% should include: original deal value, discounted value, gross profit at original price, gross profit at discounted price, profit destruction percentage, and recovery revenue needed. When reps see that their 25% discount destroys $47,000 in profit and requires $63,000 in recovery revenue, they reconsider.
3. Quarterly Discount Analysis Report average discount by rep, segment, deal size, and competitive situation. Identify patterns: is one rep consistently discounting 5 points more than peers? Is one segment extracting larger concessions? Is end-of-quarter discounting creating buyer behavior that amplifies next quarter? The data makes the invisible visible.