It’s Year-end Sale Time! Research says maybe you shouldn’t.

When December approaches, software companies face a familiar dilemma. Sales teams push for year-end promotions, pointing to competitors' discounts and the need to hit annual targets. The typical response is to approve a 10% discount, celebrate the December revenue spike, and move on to next year's planning. But recent research suggests this common practice may be more harmful than helpful.

Paddle's 2023 analysis of over 1,000 SaaS companies revealed that discounts reduce customer lifetime value by more than 30%. This isn't just about immediate revenue reduction. The data shows discounted customers exhibit different behaviors throughout their entire lifecycle—they churn faster, expand less frequently, and demonstrate higher price sensitivity at every renewal point.

ChartMogul's 2024 research adds important context to these findings. Their analysis tracked customer behavior over two years and found meaningful differences between full-price and discounted customers across multiple dimensions.

The pattern is consistent: customers acquired through promotions generate 18% less expansion revenue, submit 15% more support tickets, and refer 23% fewer new customers. These operational differences compound the direct revenue impact of the initial discount.

GetMonetizely's research examined the return on investment for different promotional strategies. Their findings challenge the assumption that all discounts drive positive returns. Deep discounts of 30% actually generated negative ROI at -15%, despite increasing initial conversion rates. Meanwhile, alternative approaches like flexible payment terms achieved 190% ROI without permanently reducing customer value.

Perhaps most relevant to year-end planning is ProfitWell's data on seasonal performance. While many companies report December sales spikes of 20-30%, the underlying market data tells a different story. Q4 traditionally represents the slowest period for new B2B sales, with December showing particularly weak performance.

The data shows December MRR churn increased 25% year-over-year, while the natural revenue lift in Q4 averages only 5-8%. This suggests that much of the perceived success of December promotions may be attribution error—giving credit to discounts for sales that would have occurred anyway due to year-end budget dynamics.

Year end promotions are like a sugar high. They feel great at the time, but the hangover can last a long time.