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The High Cost of Discounting Your Services


Offering a discount to clients might seem like a great idea, but it actually comes with a high cost. Expert Loren Fogelman of Business Success Solution explains why you should avoid the discount model and offers some terrific alternate strategies you can use.

Jul 27th 2020
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Navigating Your Initial Consultation

Like many accounting professionals, Diane offers an introductory consultation. She gets acquainted, asks targeted questions and starts to assess the accounting needs during this brief meeting. If it seems like a fit, then she discusses the next steps.

Diane comfortably asks specific questions to gather information. A subtle shift occurs as she transitions to the close. The close, especially since she lacks a sales background, intimidates her. 

She does her best to navigate through the sales conversation. Her discomfort consistently throws her off. Maybe it’s the extended silence which seems to last forever. She worries he’ll ask about a discount. Or, possibly, he mentions a price objection.  

Simply the thought of pushback causes her to break into a sweat. Her insecurities immediately flare up. And, she desperately wants to reduce the tension. So, she quickly lowers her rates to win new business.

What’s the outcome? Well, she winds up stressed, frustrated and resentful.

Discounts are Epidemic

Her discounts relieve an immediate tension. Over the long run, they come with a high cost. Here’s what discounts secretly communicate:

1. Lack of Confidence: Diane’s lack of confidence about her offer affects her bank account. Price reductions undercut her time, effort and knowledge. Overall, they lower her profits.

2. First Impressions: First impressions turn into lasting memories. Once she discounts her services, she opens the door for future rate reductions. A one-time instance creates an expectation.

3. Lowered Value: Clients judge the quality of her service according to her prices. Basically, low rates equal low quality. She unintentionally attracted price-sensitive clients rather than her ideal client.   

4. Reduced Integrity: She would state her price. Then, agree to a discount. Apparently her rates were negotiable. Subconsciously, this reduces her authority and credibility.

5. Price over Service: Discounts spotlight her prices rather than her expertise. Competing on price prioritizes volume instead of exceptional service.

6. Lowered profits. Do the math. Discounting lowers her profit margin. She’s required to work with more clients to hit her revenue goals. It's like a dog chasing its tail - she expends a lot of energy while going around in circles. What's the impact of lowered profits in your business?

Stick to Your Prices

I teach my clients, including Diane, not to cave into the discount. This includes bartering services. That’s because one person often believes they received the short end of the stick.

After she shares her fees, the dreaded discount query comes up. She was tired of caving in to the request and wanted to fix that.

Diane made a decision about who she wanted to be in her business. Attempting to please everyone was contributing to burn out. Connecting to her value, realizing what she does for her clients, starts the process.

We worked together to develop a new response.

First, Diane created a no discount and no bartering policy. This applies to family and friends, too. We spoke about the dangers of playing favorites.

Consistency across the board keeps things simple. Now she refers to her policy any time she receives a discount request.

Dress rehearsals were next. She set aside time to practice her new response. She gradually became more comfortable with her new lines.

Diane continued to experience some pressure. But, she no longer caves into it. She admits “yes” when she really means “no” creates resentment. And, it lowers her profits.   

Ready for some discount alternatives? Follow these 5 strategies to create your new response to discounts:

1. Prepay Option: Diane now offers clients an incentive to prepay in full. With this pricing option, she gets paid before she starts to work. Cash flow and efficiencies improved with this price strategy.

2. Introductory offer. Next, she developed an introductory offer for new clients. All clients start with this low-risk offer. A systematized on-boarding process is an advanced move.

3. Packages: No more a la carte services where she tracks time and bills at month's end. Diane now offers package options which bundle her services together. This pricing strategy separates her fees from time and increases her profit margin.

4. Time-Sensitive Offerings: Diane’s firm has seasonal ups and downs. She now offers her clients a limited time special for a select service.

5. Negotiate Value: Some clients can’t yet afford her regular packages. Under those circumstances, she can remove some services to adjust the price.

Diane kept track of her numbers over the past eight months. She earned an additional $56k once she stopped discounting her services and followed these steps. Plus, she freed up several hours each week since she no longer works with her primary headache clients.

Identify the reasons you offer a discount. Then consider the impact – it’s an immediate solution with long term consequences. You may unknowingly be attracting non-ideal clients. If you feel resentment or frustration, then reconsider your discount policy.

Awareness starts the process. Then decide how to answer the discount request. Practice your new response.

Gain clarity about what you offer, price the value of your offer, define your ideal client and the benefits your clients receive from working with you.

You then end up working with clients who value and respect you. Your confidence grows. And, so does your bank account.  

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