Three Letters That Can Save Your Business
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Ah, yes, the one thing that can strike fear into the heart of the most experienced business owner - dealing with a client who wants a discount. *cue music from the shower scene in Psycho
You don't want to turn the client down outright as that could be a deal killer but baby needs new shoes and those Louboutins ain't cheap. It's all part of the negotiation dance, you tell yourself. If I don't give in, I'll lose the sale/contract/opportunity. Rent is due and my calendar is light this month. If I say no, they'll tell someone else that I'm difficult to work with/too expensive/inflexible and I'll never work in this town again.
Next thing you know, you've tumbled into full-throttled oh-my-god-I-need-this-gig-or-else-I'm-doomed panic, triggering memories of being dateless four hours before Homecoming so you said"yes" to the first offer uttered by some other desperate outcast so you could go to the damn dance with a date and not look like desperate outcasts to everyone else.
You give in, breathlessly offering the discount. Life can now carry on. Crisis averted. Client is happy, you're happy, everything is fine.
Except it's not.
You've just opened Pandora's Box - and it's not the one with cute little charm bracelets. What you've done is confirm the client's belief that you were overpriced. That you were really desperate for the gig because no one else is hiring you. You've given them even more power in the client/seller dynamic because you didn't value what you bring to the table at face value so your client isn't going to either. They are going to feel that they are owed more from you because you're charging too much or that they threw you a bone by hiring you at your darkest hour. And this is not a healthy position for either party to work from because everyone ends up frustrated and far from satisfied - similar to trying to make nooky at 3 AM after a night of imbibing double shots of tequila. No one is coming away happy.
If you don't value your services or product, no one else will.
That's not to say you can go ahead and charge five gazillion dollars and call it a day (unless you're Superman and then you can charge whatever you want because hey! superpowers). Whatever you're offering has to be priced in that sweet spot where it's fair value yet you're making a profit (and if you're not or just breaking even, we need to talk).
Don't be afraid to be firm with your pricing. If clients are asking for a discount, it's for one of two reasons (and it's rarely really about the money):
a) they don't fully understand the value of your service or product, in which case you'll want to walk through your sales and marketing materials and process to see where you can amplify the benefits of what you're offering
b) they are the type of customer who always asks for a discount regardless of what they are purchasing. It's not you - it's them. Really.
For example, I'm a wedding planner and I'm always amazed by couples who ask for a discount because it's their wedding day. "That's wonderful", I want to say. "All of my clients are also having their wedding day and if I or any of the other wedding professionals you're wanting to hire were to give discounts to brides and grooms, we'd all be out of business faster than a butcher shop at a vegan commune."
So how to handle this discount dance of doom so you don't lose the sale and don't upset the customer?
I'll let you in on a small but powerful word that only has three little letters. A word so powerful, it can save you money, stress and premature greying.
W H Y
Ask your customer why they believe they should receive a discount.
It's really that simple. By throwing the question back to them, they have to come up with a reason why the want you to lower your pricing. You've not said no or yes but you have made them think through exactly why they want your services or goods for less than what you're asking.
More often then not, they likely will say something like "oh, never mind" and pay full price.
Perhaps you're a bit out of their budget. Rather than discount, offer a value-added service. For example, if someone asks me for a discount, I'd explain that I'm not able to lower my fees for their wedding but I'd be happy to include services to research possible restaurants for a welcome dinner and set up the reservation for them free of charge. By including some sort of value-added service, the customer feels their request has been acknowledged, they've gained additional value yet you've maintained your full price-point. Win/win for everyone.
Can they truly not afford you? Recommend someone else who is at their price point. You may not get the sale but you've helped someone who may become your customer down the road or could very well refer you to someone else. Successful businesses are built on goodwill and relationships, especially in this era of social media (in other words, don't get huffy over the discount request but take the high road and be a helper).
And if the customer doesn't fit with you, that's fine. It's far better to have one great customer for your offering than three that don't fit as in the end, the time and stress are going to cost you more than what you've gained with the sale.
Knowing when to walk away from a sale takes a guts and it's one of the hardest things you'll do as an entrepreneur but one of the best for your business.
Fear-less and profit more. Go for it.