Online Store - Introduction
Excerpt from "Discounting Practices in the
A Study of Discounting Use, Monitoring, and Control"
Discounting Practices in the Software Industry-
A Study of Discounting Use, Monitoring, and Control
(View the Table
of Contents. You can also order a
copy online or print an order
form to mail with a check.)
This report reviews the results of a recent survey conducted by
Software Pricing Partners, Inc., which examines the depth and breadth
of discounting in practice at US software companies.
Beyond investigating the scope and character of discounting in
the software industry, this study asks and answers the question:
"How well are software companies monitoring and managing discounting
in today's economic climate?"
The intent of this report is to provide insight into overall discounting
practices and identify best practices in better-performing companies
that can be broadly implemented. While this survey's findings focus
on software companies, the impact of discounting on a company's
bottom line will be of interest to financial executives overall.
Furthermore, the sources of discounting and the degree to which
they are tracked and controlled should also be of interest to the
purchasers of business software.
Market analysts put the size of the worldwide packaged software
industry at $80B in 2001 with annual growth in the 3% range. Throughout
2001 and 2002, US software companies have frequently reported difficulty
making their revenue and profit targets.
Discounting product sales to corporate customers is the tool of
choice for many software companies to improve their performance
in the current soft economic climate. For some, discounting improved
performance. For others, discounting did little more than leave
badly needed revenues and profits in customers' pockets. This survey
documents linkages between discount tracking and controlling and
company performance. It also, shows the connection between realistic
levels of standard (scheduled) discounts and lower total discounts
The objectives of the research performed were to:
- Determine the use of discounts in the software industry
- Determine the degree to which companies monitor discounting
- Determine the degree to which companies manage discounting
- Identify the benefits of tracking and controlling discounts
- Identify potential links between discounting and company performance
- Identify the best practices of companies that track and control
Fifty-four software companies participated in this online survey,
which was developed by Software Pricing Partners and hosted on the
Financial Executives Research Foundation (FERF) website during the
spring and summer of 2002. Responses were collected and compiled
by FERF with analysis and interpretation provided by Software Pricing Partners. Responding companies ranged in size from under $10M to
over $1B, with an average of 66% of that revenue derived from direct
sales to end-user companies. (Appendix 1-Participant Demographics)
The following key findings surfaced regarding discounting in the
- Discounting is widespread, and significant. All responding
companies reported using discounts, and those discounts averaged
nearly 40% of list price.
- Company growth rates appear to be inversely related to the
extent of discounts allowed by respondent companies, with
respondents in faster growing companies reporting discounts that
were nearly 20 percentage points less than discounts given by
slower growth companies.
- The advantage of monitoring discounts is widely recognized
by respondents. Nearly 75% of respondents acknowledged one
or more important benefits to monitoring discount activity.
- The actual extent and character of discounts given is not
generally known nor documented by respondents. Less than 50%
of respondents reported that they track discounts either frequently
- Negotiated discounts were significantly lower in companies
where discounting is tracked. Negotiated discounts by "trackers"
averaged approximately 7 percentage points below what was allowed
The Discounting Practices Survey is a 24 page, 8-1/2
x 11 inch format, electronic document. A detailed Table
of Contents can be viewed by clicking here.
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