What is high-low pricing? Discount cycles, and why software mostly should not use them
Written by Arnon Shimoni
✓ Expert
Last updated on:
High-low pricing sets a relatively high list price and then runs frequent discounts and promotions against it. Customers learn that the list price is not the real price and time their purchases around the promotional cycle.
It is a retail strategy that works well in retail. Applied to B2B software it produces a predictable and damaging outcome: a list price nobody pays, buyers who wait for quarter end, and a sales team negotiating against its own discount history.
Field | Detail |
|---|---|
What it is | A high list price combined with frequent promotional discounting |
Contrasted with | Everyday low pricing, where the list price is the real price |
Works in | Retail and consumer goods with high purchase frequency |
Fails in | B2B software, where buyers are repeat negotiators and prices are compared |
Symptom | Most deals closing in the last two weeks of a quarter |
Related |
Why it works in retail
Purchase frequency is high. Shoppers buy weekly, so a promotion reaches them soon after they notice it.
Reference prices are fuzzy. Few consumers know the true value of a given item, so a discount against list reads as a genuine saving.
Promotions drive traffic. The discounted item brings people in and they buy other things at full price.
Price discrimination is automatic. Price-sensitive shoppers wait for the sale, others buy at list, and the same product serves both.
Why it fails in B2B software
Condition | Retail | B2B software |
|---|---|---|
Purchase frequency | Weekly | Every one to three years |
Buyer sophistication | Varies | Professional, repeat negotiators |
Price transparency | Low between buyers | High. Buyers ask peers and analysts |
Deal size | Small | Large enough to justify waiting |
Effect of discounting | Drives traffic | Trains buyers to wait and to distrust list |
The failure mode is specific. Once buyers learn that the price drops at quarter end, they wait for quarter end. Pipeline compresses into the final weeks, forecasting deteriorates, and the sales team loses its ability to hold price because everyone knows the discount is coming.
Worse, the discounts usually have no expiry, so the promotional rate becomes the permanent rate for that account. See discount management and margin leakage.
What to do instead
Set a list price you can hold. If most deals close well below list, the list price is not a price. Lower it and reduce discretionary discounting.
Make concessions earned rather than granted. A better rate for a longer term or a higher commitment is a trade. See minimum commit.
Put an expiry on every promotional rate. Enforced by the billing system, not recorded in a contract.
Differentiate structurally. Segment rate cards and tiers capture willingness-to-pay variation without a discount cycle. See tiered pricing.
Decouple quota timing from pricing. If quarter end is when discounts appear, the incentive structure is setting your prices.
Where Solvimon fits
Solvimon enforces validity dates on promotional rates, so a discount granted for a quarter actually ends when the quarter does. Effective rate per account is directly readable, which shows how much of your list price is surviving contact with the market.
Segment rate cards and commitment-linked tiers are native structures, which is how price differentiation is achieved without a discount cycle.
Frequently Asked Questions
What is high-low pricing?
A strategy of setting a high list price and running frequent promotional discounts against it, so that customers who are price sensitive buy during promotions and others pay list.
What is the difference between high-low and everyday low pricing?
Everyday low pricing sets a consistently low price with few promotions. High-low sets a higher list price and discounts frequently. Retail uses both successfully. B2B software generally only sustains the former.
Why is high-low pricing bad for B2B software?
Because buyers purchase infrequently, negotiate professionally and compare notes. Once they learn discounts arrive at quarter end, they wait, which compresses pipeline and removes the sales team's ability to hold price.
What is the sign that high-low pricing has taken hold?
Most deals closing in the final two weeks of a quarter, and an average discount deep enough that the list price no longer describes what anyone pays.
Are quarter-end discounts ever justified?
As a genuine time-boxed incentive with an enforced expiry, occasionally. As a predictable pattern, no, because buyers optimise against any pattern they can detect.
What should replace it?
A list price you can hold, concessions earned through term or commitment rather than granted, enforced expiry on any promotional rate, and structural differentiation through segment rate cards and tiers.
Related
Discount management. Controlling concessions so they expire.
Margin leakage. What permanent promotional rates become.
Deal management. Governing when discounts are allowed.
Tiered pricing. Differentiating without discount cycles.
Price benchmarking. Setting a list price you can defend.
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