So, you have a prospect who's interested in using your services, but they find you a little expensive. Could they please have a discount? It's hard to say no. Finding new clients can be tricky and there's a lot of work that goes into marketing your firm. Clearly they're interested in what you offer if they've gotten to this point... And what harm does one little discount do in the long run?
Well, you may come to regret that little discount - and not just because it means you're taking home less money.
Here are a few reasons you shouldn't offer clients discounts, as well as what you should do instead.
Why shouldn't you offer discounts?
Here are the top four reasons to consider ditching your discount plan:
1. You devalue your expertise
During the process of acquiring a client, you spend a lot of time and energy expressing the value of what you offer. You explain what you can do for them, why they should be interested, why you're the best person for the job. And all of this value should be encapsulated in the cost of your services. If you say yes to a discount, this suggests that your services aren't really as valuable as you made them out to be originally.
2. It makes clients question why you wanted to charge them so much in the first place
If you say yes to giving a discount, your client or prospect will begin to question why you offered such a high price originally. They may wonder if you wanted to rip them off, if your services are perhaps only worth a fraction of what you ask for. This idea can lead them to lose trust in you, which will damage the relationship you are trying to build with them.
3. Once you've said yes to a discount once, it's difficult to say no next time
Once you've given one discount, your clients will always anticipate the possibility of another. And if you give one client a discount, other clients may soon follow suit. This means a lot of uncomfortable conversations, a lot of saying "No" and a lot of explaining why you can't always give discounts - which you shouldn't have to do in the first place.
As James Ashford of GoProposal writes, the answer to what discount you can give a client should always be, "Absolutely none, but I don't blame you for asking." You can't blame them for asking; it's only natural to look for a bargain. You just don't want your services to be that bargain.
4. It's More Difficult to Raise Prices Later
Raising the price of your services is never easy, but it's made much worse if you often offer discounts. If clients are used to the discounted price, then the new, higher price will be a great leap from what they've come to expect. Your clients will struggle to understand why they should pay you such high new rates when you seemed happy for them to pay at the discounted rate.
What's the solution?
This all sounds a bit grim. People are always looking for a good deal, a discount, a coupon, a bargain. I know I've bought many things just because they're on special - much to my chagrin. But that doesn't mean that you have to cave to these demands, especially given all the long-term repercussions listed above. So, what are you to do?
Here are a few ways to handle the issue of clients asking for discounts:
1. Make sure you price yourself right the first time
Explaining why you charge what you do is much easier to do if you're asking for the right amount in the first place. But sometimes, setting a price can be difficult. Do you charge by the hour? By the type of service?
Intuit QuickBooks notes that hourly billing is not necessarily the way to go as it doesn't provide clients with certainty. As they write in their pricing guide:
"Pricing based on how long the work will take means clients do not know what the final bill will be until after the work is completed and the hours added up. They hate it. They can’t budget and plan for the cost."
Moreover, if you charge by the hour, clients will frequently find you expensive as there's no perceived value in an hourly rate. As the guide says, "Clients don't come to you to buy time and so they see no value in an hour of your time." So what's the alternative?
Value pricing
Not to be confused with fixed pricing, value pricing is pricing that acknowledges that value is subjective: every client perceives value differently. Therefore, every client should have a different price.
To go about creating the right price, you first need to find out what your client values, what their pain points are, and what they're trying to achieve.
You can make an initial offer with a high price and then whittle that down to exactly the services they're interested in - with a lower price. This isn't the same as giving a discount, as you aren't offering them your full array of services. Rather, you're offering them a personalized bundle of services that suit their exact needs.
Pro tip💡: If you want to get the best price and maximize your profits, you use Optimal Pricing. This means setting your price at the maximum each individual client is willing to pay.
If you charge a low price, you can only afford to do the bare minimum. With added value comes added cost. Which leads to the second point...
2. Instead of giving discounts, add value through extra services
If you charge too little, you'll find yourself working hard for little in return. You're not going to want to spend time and effort on additional services for your clients. But, as it turns out, clients are increasingly wanting more from you.
If you charge a good amount, you can offer added value, such as advisory services, which can be charged at an additional cost.
If you increase your price, you can free up time and resources by investing in helpful software, and offer your clients more. Think of what you can add to their businesses and lives, rather than what you can save them on fees.
And, with the right advisory services, they could actually end up saving a lot more money than they would have on a discount from you!
3. Turn away clients who can't afford your services
This one is easier said than done, especially if you've been looking hard for new clients, but if someone says that what you charge is beyond the scope of their budget, they're probably not the right fit for you. In this case, the best you can do is say no to them - at least for now - or refer them to someone better suited. Do so cordially. You don't need to burn any bridges while you're at it. (More on this later.)
4. Be transparent about what you charge and what services you offer
Be upfront about your fees, how you price services, and what exactly you offer. No one likes surprise costs creeping up on them, and transparency is paramount to building trust.
5. Don't burn bridges
I already hinted at this one earlier, but it's worth repeating. Just because someone isn't the right fit for your practice now doesn't mean they won't be later. Perhaps their financial situation will change down the line, or their needs will. If you parted on good terms, they may well consider coming back to you at a later stage.
It helps to have a solid follow-up system with prospects who didn't end up taking your offer. Ask them why they chose to go elsewhere, what they were looking for, and so on. And maybe follow up with them in a few months or even a year's time to see if anything has changed.
Leave discounts to the supermarket
Pricing a service is never as straightforward as pricing a product. The onus is on you to express the value of the services you offer clients, and, ultimately, offering discounts only undoes your work, jeopardizes clients' trust in you, and makes it more difficult for you to raise your prices later on.
The most important thing you can do is make sure that you price your services correctly to begin with and maintain good, transparent relationships with clients and prospects that promote trust. When it comes to discounts, it's probably best to leave these to the supermarkets.