Average Discount Depth
Average percentage discount applied across all closed deals relative to list price
What is Average Discount Depth?
Average discount depth is the percentage of list price given away, on average, across closed deals. It shows how much price is conceded to win business.
Deep average discounts reduce revenue and margin and can signal weak value selling or pricing that is too high.
How this KPI is measured
- Function
- Sales
- Sub-function
- Pricing
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- %
- Measurement frequency
- Monthly / Quarterly
- Formula
- (Total discount given / Total list price of all closed deals) × 100
How to calculate it
Divide total discount given by total list price of all closed deals, and multiply by 100.
For example, if closed deals had a list price of 3,000,000 and 450,000 was discounted, the depth is 15%.
Look at the distribution by rep and deal, since a few deep discounts can pull up the average.
Where it is used
Protecting margin
Spot excessive discounting.
Setting approval limits
Decide who can approve what.
Coaching
Help reps sell value.
How to improve it
Tips and common mistakes
- Similar to discount rate, use one definition consistently.
- Watch quarter-end behaviour.
- Link discounting to win rate to test its impact.
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