SOP: Pricing & Discount Approval

1. Purpose

The purpose of this SOP is to establish clear approval rules for applying discounts and finalizing pricing in proposals. This ensures profitability, prevents margin erosion, and maintains pricing discipline while still allowing flexibility for competitive situations.

2. Scope

This SOP applies to:

  • All proposals and commercial quotes created by Sales Representatives or Account Managers.
  • Deals across IT Services & SaaS offerings, regardless of geography or segment.
  • Sales, Pre-Sales, Delivery, Finance, Sales Managers, and Head of Sales.

3. Definitions

  • Standard Pricing: Published or pre-approved pricing for services/products.
  • Discount: Any reduction in list/standard pricing, including early payment incentives or bundled offers.
  • Approval Thresholds: Defined limits of discounts that require different levels of approval.

4. Step-by-Step Process

A. Discount Request Trigger

  • Discounts may be requested if:
    1. Competitive pressure exists (client evaluating alternatives).
    2. Large multi-phase deal negotiated.
    3. Long-term contract commitment (1 year+).
    4. Early payment incentive considered.

B. Discount Approval Workflow

  1. Sales Rep Initiates Request
    • Drafts proposal in standard template.
    • Calculates proposed discount percentage.
    • Submits request in CRM or via Approval Matrix workflow.
  2. Review by Sales Manager
    • Validates rationale for discount (competitor, deal size, client tier).
    • Checks alignment with pricing guidelines.
  3. Pre-Sales & Delivery Input
    • Pre-Sales: Confirms solution still viable within reduced margin.
    • Delivery: Confirms feasibility and resourcing not at risk.
  4. Finance Validation
    • Confirms gross margin after discount.
    • Ensures compliance with revenue recognition rules.
  5. Final Authority (Head of Sales / CEO)
    • Provides sign-off based on Approval Thresholds (see below).

C. Approval Threshold Matrix (Example – customize for organization)

Discount %Deal Value (USD)Required ApprovalsFinal Authority
≤ 5%≤ $25,000Sales ManagerSales Manager
6–10%$25,001 – $100,000Sales Manager + Pre-Sales + DeliveryHead of Sales
11–15%$100,001 – $250,000Sales Manager + Pre-Sales + Delivery + FinanceHead of Sales
> 15% or > $250,000AnySales Manager + Pre-Sales + Delivery + FinanceHead of Sales / CEO

D. Post-Approval Actions

  • Approved discount documented in CRM → “Discount Approved” field.
  • Proposal updated with correct pricing and version (v2, v3).
  • Finance notified for margin tracking.
  • Sales Rep communicates updated proposal to client.

5. Roles & Responsibilities

  • Sales Representative: Initiates discount request, justifies rationale.
  • Sales Manager: Validates and approves within authority.
  • Pre-Sales Consultant: Confirms solution viability post-discount.
  • Delivery Manager: Validates delivery feasibility with reduced margin.
  • Finance: Ensures commercial compliance and margin thresholds.
  • Head of Sales: Approves higher-value/discount deals.
  • CEO (if required): Signs off exceptional discounts beyond standard limits.

6. Governance, Violations & Consequences

  • Discounts without approval → proposal rejected and deal rollback.
  • Unauthorized commitments to client → escalation to Head of Sales.
  • Repeated violations → subject to disciplinary action under Sales Performance Management Policy.

7. Review & Ownership

  • Document Owner: Head of Sales.
  • Review Cycle: Quarterly, aligned with pricing strategy updates.
  • Version Control: Maintained in CRM knowledge base.