When a client asks for a discount for your services, it may feel like that person is asking to take money out of your pocket. My last company was a media business where most of our revenue came from advertising, which is an industry where discounting is commonplace. I knew early on that I needed an approach to dealing with clients asking for a discount.
Train Your Team
I train my team on how to handle discounting requests. The more confident they are in dealing with the discounting issue, the more money will stay in my pocket instead of in the client's. Confidence comes from practice.
Salespeople usually want to get a deal done, so when a client asks for a discount on the rate, your sales team might agree in order to close the deal. But I’ve found that it may also be important to train your staff not to offer a discount. You might be surprised how often a salesperson does this when he believes it will help get a deal done. Many people are uncomfortable in asking for a discount. Don't make it easier for them.
If a client does ask for a discount, consider training your sales team to ask why your company’s rate doesn't seem appropriate. The client may say something like, “It seems expensive," to which your sales team might reply, “Interesting. What are you comparing it to?"
If the client is comparing your company to a competitor, and assuming that your competitor is really cheaper, your sales team might explain why the benefit of working with your company is worth more to them than the benefit of working with your competitor. Whatever the reason the client asks for a discount, it may be critical that you understand why they are doing so.
In my experience, I have found that if a client doesn't think the price is right, they doesn't see the value in what we do. And that may be because we didn't do a great job of understanding the client's needs and desires and showing how our product is a great fit earlier in the sales process.
Add or Remove Value
If you choose to consider a discount, consider preserving the price and the gross profit as well as the perceived value of the product.
Two ways you might accomplish this:
- Add value. Let's say one of your company’s services costs $5,000 and the client wants a $500 discount. I might offer to throw in an extra service that is worth $500 and keep the price at $5,000.
- Reduce value. If the client says the price exceeds their budget, you can lower the price to meet their budget—but also reduce the value you deliver. For example, with my old media business, if a client was going to buy a full-page ad for $5,000 but only had $4,000, I would suggest a 2/3 page ad instead.
Sometimes the best choice may be to stick to your guns on your rate. Sure, you may risk losing a sale, but assuming that you have set your prices so that they truly reflect the value of what your business offers, the client will hopefully agree and buy at your original price.
The information contained in this article is for generalized informational and educational purposes only and is not designed to substitute for, or replace, a professional opinion about any particular business or situation or judgment about the risks or appropriateness of any financial or business strategy or approach for any specific business or situation. THIS ARTICLE IS NOT A SUBSTITUTE FOR PROFESSIONAL ADVICE. The views and opinions expressed in authored articles on OPEN Forum represent the opinion of their author and do not necessarily represent the views, opinions and/or judgments of American Express Company or any of its affiliates, subsidiaries or divisions (including, without limitation, American Express OPEN). American Express makes no representation as to, and is not responsible for, the accuracy, timeliness, completeness or reliability of any opinion, advice or statement made in this article.
This article was originally published on May 22, 2015.