Dumb customers boast about their discounts; smart customers boast about how much they pay

Quick, which is better: (a) 50% off of $100 or (b) 25% off of $60?

And before you dismiss the question as an insult to your intelligence-which it is-know that a surprising number of major enterprise buyers act as if the answer is (a).

Any bright 10 year old can tell you that it’s not the discount that you get off some moronically inflated number that matters, it’s what you actually end up paying. Yet we still come across customers every month who boast that they got a 70% or an 80% discount, and then can’t tell us what the base price was on which they got this glorious concession.

Needless to say, the providers love these customers, and play to their “needs.” They do this by inflating rack or standard rates by 5% or 10% annually, and then offering the customer “an additional 10% discount” at renewal. A little analysis would reveal that the result is a price (in a declining cost industry) that’s higher than the price the customer got last time. But who cares? The discount is bigger!

Bottom line: Seek to stabilize the rates for most of the services you buy, rather than accepting discounts off of malleable rack/service guide rates. And when you are comparing offers, do it based on the bottom line-not the discounts.