Why You Should Never Offer Discounts (And 3 Alternative Tactics For Overcoming Price Objections)
It sucks talking about money.
We’ve all had that moment when we tell our prospect, “My service costs $X” and the number lingers in the air. You start thinking, “Is their jaw going to hit the floor? Are they going to walk out? Or did I actually price it too low and they’re going to think I’m an amateur?”
In moments like this you start to think, “Maybe I can close the sale by offering a discount.” You feel like giving them a deal will alleviate some of the tension.
Or sometimes the client is the one who brings it up: “That’s a little out of my budget. Do you ever offer discounts?”
I’m not going to say you should never give a discount, but today I’m going to share five ideas that are even more powerful. Try these and you can get the results you’re looking for, while keeping your money.
Why you shouldn’t offer discounts
Before we get into the alternatives, I want to explain the problems with discounts.
1. Perceived value
Business is an exchange of value. You give me value in the form of a product or a service, I give you value in the form of dollars. As a result, the most important thing you can do as an entrepreneur is to increase the value of your offer.
The problem is, it’s very hard to increase the perceived value of your product or service while simultaneously dropping the price. You’re sending a mixed message: “This is actually worth a lot of money… but it doesn’t cost very much.”
Chances are the client will think, “Well, if the price is dropping, that’s obviously what this is really worth.”
2. Keeping them in the door
Once I heard a youth pastor talking about how high school church groups get kids to come to their events. Many will have one night a week where they get together to play games and eat pizza, then at the end there’s a short talk about religion.
The pastor said, “The problem is whatever you do to get them in the door, you have to keep doing to keep them in the door.” If a kid shows up for fun and free pizza, the second the games stop and the pizza runs out, they’re gone.
It’s kind of like casting a worm on a hook into a lake… and expecting to reel in a steak. The bait has to correspond to the catch.
The point is, by using discounts you’re attracting clients that don’t want to pay full price. Even if you do a great job, the second you raise your rates they’ll groan. And when you put your more expensive products in front of them, there’s less chance they’ll say yes.
3. Training your clients
Another huge issue with agency owners and freelancers is whether or not you should ever do free work to get your foot in the door.
I heard a great rule of thumb: do free work if you offer it, but never if the prospect requests it.
I think the same applies for discounts. It might be a good idea if you think of it. But if the client requests it, you’re probably just teaching them that they can undermine your value.
Anything is worth what someone is willing to pay for it. And conversely, just because someone isn’t willing to pay a certain price, that doesn’t mean it’s not worth that much or even more to someone else. So I don’t like prospects feeling like they can decide the value of my service.
What to do instead
1. Get creative with payment plans
The first reason for a price objection that a client will give is, “I just can’t afford it.” (We’ll get into this more in a minute, but in my experience that’s usually just an excuse.)
In that case, you can get creative with payment terms. Instead of charging the client monthly, offer to charge them biweekly.
Or offer to do a 3/6/12 month contract, and in exchange you can offer a lower monthly price.
In many cases though, you can say, “I totally understand that. If your budget changes in the future, I’ll still be here!” You’ll be surprised how often you’ll get an email a few days later, and they’re suddenly able to get started.
2. Find other ways to reduce the risk
A lot of times when a client is resistant to the price, it’s not because they can’t afford it. It’s because they’re not certain they’re going to get the results they want.
Think about it like this: if your client was 100% sure they were going to get the results they need, (and the results were worth more than the cost of the service) they would pay full price, right? They’d be crazy not to. In fact, they’d probably pay more.
So rather than reassure them with a discount, it’s even more effective to give a guarantee.
You can say, “I can’t reduce the price, because that’s what it costs me to provide the service. But I stand behind my work. If you don’t get the outcome I’m promising, I’ll refund your money.”
You can also do a satisfaction guarantee rather than a money-back guarantee. “I’ll work with you to make sure you’re 100% happy with the final product. And if it doesn’t meet your standards, I’ll let you out of the contract and/or give your money back.”
Another way you could reduce the risk is to base payment off a percentage of performance. If you’re helping grow your client’s business, take a percentage of growth. This way you only get paid when they do. It completely removes the risk.
3. Reduce cost by increasing value
Have you ever gone on vacation to a popular tourist destination- Mexico for example- and a cute little kid approaches you on the beach and tries to sell you a piece of jewelry. They want an astronomical amount of money, and it’s clearly not worth that much. But you feel bad haggling with an underprivileged kid.
What I like doing is saying, “I’m not going to pay you $20 for that, but I’ll give you $30 for two.” Everybody wins. The kid gets some extra cash, I get a better deal, and I save a ton of time having to argue over the price.
You can do the same thing with your service. Rather than dropping your price, just pile on the value. Say, “I actually don’t have any flexibility on the price, but here’s what I can do. I can add this other product or service that normally costs extra. I can give you access to this other thing that will magnify your results while minimizing the time.”
It could be another offer you have. It could even be as simple as giving them your phone number so they have access to you and they’ll never feel stranded.
Oftentimes this alone will close the deal. The client feels like they’re budging on how much they want to spend, and they want to see that you’re willing to make a concession to meet them halfway.
Let me know what works for you
These aren’t rules set in stone. You’re not a bad agency owner if you ever give discounts. But this has worked for me, and I’m confident it will work for you too.
The next time a client asks for a discount, or the next time you have an uncomfortable money conversation, try using one of these tactics. Leave a comment below and let me know how it worked.
Also, I’d love it if you left a comment with your own tips and tricks. How do you overcome price objections. Let’s help each other close some sales!
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