commercial-policy

---
name: commercial-policy
description: Use when designing or revising discount rules, approval thresholds, exception flows, or the discount matrix governing how deals get discounted off list price.
category: Commercial
version: 1.0.0
tools: []
---

# Commercial Policy

Design the rules of engagement that govern discounting off list price — the artifact that Deal Desk and account executives operate under. Three components:

1. **Discount matrix** — a 4-dimensional matrix (ARR band × term length × payment terms × strategic-value tier), each cell carrying an approved discount band backed by current win-rate and NRR data, plus an approver tier (AE / Manager / Director / VP / CFO).
2. **Exception routing** — when a discount ask lands outside the matrix, route it through the named approver chain, attach required compensating commitments (multi-year prepay, named expansion path, reference commitment, MSA tightening), produce audit-trail metadata, and flag precedent risk if 3+ similar exceptions have landed in the trailing quarter.
3. **Policy linting** — check the matrix for governance defects: approver inversion, band inversion, margin-floor violation, coverage gaps, cliff edges, undefined strategic tiers, inconsistent margin floors, thin data backing.

The output is the policy itself — matrix, exception flow, and lint report — not a per-deal application of it.

## When to Use
A new Head of Commercial or Head of Deal Desk is writing the company's first formal commercial policy. The existing matrix is older than 6 months and discount drift shows up in margin reviews. Reps cite "Maria approved 28% on Acme last quarter" as precedent and the precedent loop needs breaking. Exception count is rising quarter over quarter and the matrix bands may be mispriced. The CFO has tightened the margin floor and the matrix needs rebuilding against the new constraint. An exec asks "why do we discount this much?" and needs a data-backed, defensible answer.

Not for: approving a specific deal (that's per-deal application); setting the pricing model or list price (that's upstream of this); authoring proposal/SOW/MSA prose; the strategic "when do we hire a VP Sales" call.

## Workflow

**Step 1 — Audit the current discount distribution.** Pull the last 4 quarters of closed-won and closed-lost deals from the CRM. Capture ARR, discount %, term length, payment terms, strategic value, win/loss, and 12-month NRR per deal.

**Step 2 — Design the data-backed matrix.** Produce a 4-dimensional matrix with an approved discount band, approver tier, margin floor, observed win-rate, and observed NRR per cell, tuned to an industry profile (SaaS, enterprise software, API, marketplace, services). Cells with fewer than 5 observed deals are flagged THIN.

**Step 3 — Design the exception flow.** For each severity band of exception (0–5 points over, 5–10, 10–20, 20+), enforce required compensating commitments. Codify the flow in the policy document; it becomes the operational routing logic.

**Step 4 — Lint the matrix.** Produce a ranked findings report — BLOCKER / MAJOR / MINOR — across 10 lint rules. Resolve every BLOCKER before publishing the matrix to AEs.

**Step 5 — Publish and review quarterly.** Publish the matrix as a versioned artifact. Rebuild and re-lint it every quarter against the new 4-quarter rolling deal corpus. Flag cells where observed NRR falls below target for review.

## Canon
Discount governance: OpenView Partners benchmarks, David Skok (*For Entrepreneurs*), Tomasz Tunguz, Bessemer State of the Cloud, KeyBanc Capital Markets SaaS Survey, Bridge Group AE-compensation research, RevOps Co-op playbooks, Forrester deal-desk research. Policy design: SaaStr (Jason Lemkin), Winning by Design (Jacco van der Kooij), Forrester deal-desk maturity research, MIT Sloan on incentive-system gaming, McKinsey on commercial-policy effectiveness, Bain *Pricing Power*, Salesforce CPQ implementation guides. Anti-patterns (8 named, sourced): precedent-sets-policy, no-data-backing, no-compensating-commitments, approver/margin misalignment, no audit trail, cliff edges, undefined "strategic value," no quarterly review.

## Assumptions
The pricing model and list price already exist; this governs discounts off list, not list itself. The CFO owns the margin-floor constraint; the CRO or Head of Deal Desk owns the max-discount-without-exception band cap — kept separate by design, since mixing accountability is the most common cause of policy drift (Bain, *Pricing Power*). Industry profiles bake in customary band widths; companies with idiosyncratic economics should override via input data. The matrix is data-backed but not data-driven — the band is set by constraints plus profile; observed data is annotation showing whether the cell is performing. If observed NRR is below target, that's a signal to review the band, not to discount deeper. "Strategic value" tiers (logo, expansion, lighthouse) are only useful if defined with concrete tests. This produces the matrix and exception flow; per-deal approval is a separate, downstream application.

## Anti-Patterns
Setting discount bands without data backing — "the VP argued for it in Slack" is rhetoric, not a band; show win-rate and NRR or don't set it. Letting precedent set policy — an approved exception is an exception, not a band; 3+ similar exceptions in a quarter signals the matrix is wrong, not the deal. Approving exceptions without compensating commitments — discount-for-nothing is a leak; every severity band requires non-negotiable commitments. Cliff edges at round-number ARR thresholds produce deal-size gaming within 2 quarters (MIT Sloan agency theory) — smooth the gradient instead. "Strategic value" as an undefined catch-all — within a quarter, 60% of deals get flagged strategic if it's undefined; define with concrete tests. No quarterly review — markets shift, and matrices unchanged for 12 months are mispriced. Mixing CFO and CRO accountabilities produces predictable drift toward whatever the single owner is compensated on. Skipping the lint pass before publishing — BLOCKER findings make a policy unsignable; lint is the gate, not the after-action review.

## Forcing Questions (walk one at a time, depth-first, lock 1–4 before opening 5–8)

1. What's your observed discount distribution across the last 4 quarters, and is the median inside or outside your current matrix? Recommended: pull the corpus before designing any band; if the observed median is outside the matrix, the matrix is rhetoric. Canon: OpenView SaaS Benchmarks, RevOps Co-op playbooks.

2. What's the win-rate AND the 12-month NRR for deals at your current "max discount" band? Recommended: both, not one — high win-rate with low NRR is buying logos with leaky retention. Canon: Tomasz Tunguz benchmarks — top-NRR-quartile companies discount 6 points less than the bottom quartile.

3. Who owns the margin floor, and who owns the discount-band cap — is it the same person? Recommended: CFO owns the floor, CRO/Head of Deal Desk owns the cap; the same owner drifts toward what they're compensated on. Canon: Bain, *Pricing Power*.

4. How is "strategic value" defined in your current policy — concrete tests or adjectives? Recommended: concrete tests. "Top-20 named account in the 2026 target list" is a test; "important customer" is not. Canon: SaaStr (Lemkin), Forrester deal-desk research.

5. For exceptions above your matrix max, what compensating commitments are required, and are they in writing before the approver signs? Recommended: minimum multi-year prepay plus named expansion path; deeper exceptions require reference commitment, MSA tightening, and an executive sponsor. Canon: Winning by Design (van der Kooij), McKinsey B2B pricing studies.

6. Has the same kind of exception been approved 3+ times in the trailing quarter — and if so, is the matrix wrong? Recommended: 3+ similar exceptions means the band is mispriced; rebuild the matrix rather than keep approving exceptions. Canon: OpenView discount-drift studies.

7. When did you last re-run the matrix against the previous 4 quarters of data? Recommended: quarterly — annual review is too slow. Canon: OpenView benchmarks, RevOps Co-op.

8. For every exception last quarter, is there a machine-readable audit-trail record, or is the approval in Slack and email? Recommended: a structured record in CPQ or equivalent — informal approvals don't survive year-2 renewal negotiations. Canon: Salesforce CPQ best practices, Forrester deal-desk maturity research.

The sample matrix, exercised against every rule path, lints to FAIL with 4 BLOCKERs, 6 MAJORs, and 2 MINORs by design; a real policy intake should lint to PASS or PASS-WITH-WARNINGS. A sample exception of 42% on a $320K logo deal routes AE → Sales Manager → Director → VP Sales with 3 required compensating commitments (36-month multi-year term, prepay, named expansion path).