You’ve got this great client. Let’s call her Jane. You’ve been working together for years, and you think the relationship is pretty rock solid. One day Jane calls you out of the blue and says ‘Look, we’ve enjoyed working with you all these years but times are tough. We’re gonna need you to give us a 20% discount going forward please.”
How do you react? Should you give her the discount to make sure you retain her business, in the hope that times will get better and you can put the price back up? Or should you say ‘No’ and risk losing Jane’s business for good?
Being asked for discounts seems to be a trend that’s on the rise – and in my world, that’s symptomatic of the types of relationships we have with our clients. If your client is coming to you and asking for a discount, it tells me that you don’t have a trusted, partner relationship with them. You have either a social, technical or ad-hoc relationship with them – which is making you a commodity that can be discounted.
Don’t get me wrong – I understand the pressure as a small business owner to make sales and keep working coming in the door. I understand why people think cheaper work is better than no work. But the trouble is that it’s a race to the bottom.
When you offer a discount, you’re not actually offering a discount, you’re setting a new, lower price point in the market.
It might be a low price point for your product or service specifically, but it might also be a low price-point across the industry. It’s a very dangerous strategy.
Here’s what I recommend you do when asked for a discount, or when you’re feeling pressure to ‘buy’ some work:
- Make sure you have a long term strategy (say three years) around your pricing and profitability. This should detail your pricing for different offerings, different clients, and different situations such as when you are prepared to compromise revenue for brand positioning or something similar. Every time you think about discounting – refer back to this so you’re not reacting in the moment.
- Stick to your main price on your main offering and on this one occasion offer them something free. It’s a one-off freebie, and that is a very different position in the market than offering a discount. The net position is the same, but your client sees that ‘x’ is the true price for the main item and you’re giving them something else for thing free on this one occasion. This is a very, very different position.
- Once you’ve done this, sit down and run a strategy session on your client – about how you’re going to shift your relationship to a partner relationship.
In trusted partner relationships, clients don’t ask you for discounts. If they’re faced with financial pressures, the conversation they’ll have with you is more along the lines of “Times are tough. Can we talk about how we might be able to come up with a solution together to lower or offset some of our costs, or save some money?”
That’s a big difference to being asked for a discount.
What do you do when asked for a discount?