In times of so much uncertainty and fear it’s really normal (and healthy) to be asking what you need to do differently to keep your business afloat.
One question that a lot of people have asked me over these last few weeks as we enter into COVID-19 Lockdown is whether they should be discounting their prices in order to retain customers.
This is one of those areas where there’s no “one size fits all” answer.
Whether it’s the right thing for you and your business will depend on your specific circumstances.
However, there‘s a number of considerations worth reviewing before heading down the discount route.
And, if you still believe discounting the right move for you and your biz, there are ways to do it that will offer some protection and limit your financial exposure.
I’m gonna cover both here.
Under normal circumstances I generally advise against discounting your products or services.
This is because:
1. Unless you’ve built your commercial model with discounting in mind, discounting eats into your profit margins meaning there’s less money to pay yourself and grow your business.
2. It can set an expectation that you can and will deliver for less. Over time this can lead to a situation like the “Briscoes Effect” where people view your discounted prices as the norm and will be reluctant to pay full price.
3. Ultimately it leads your clients to perceive the VALUE of what you do as being worth less. And that is NOT the direction you want to go.
So what can you do instead?
#1. Focus On Value First
One of the first areas you want to explore is to truly understand the VALUE of the product or service you provide so you not only understand and can articulate it, but you truly BELIEVE it as well.
Because once YOU truly believe in the value, it's that much easier to communicate that value to others, so they understand why it IS worth paying that price.
This isn't about focusing on what you think you're worth, but rather on the CHANGE you enable your clients to achieve and how valuable that is to THEM.
That is at the core of Value Based Pricing and is the most powerful pricing methods I teach in How To Nail Your Pricing And Pay Yourself What You're Worth.
TIP: Before doing anything else make sure you spend the time to truly understand what your product or service enables your clients to achieve (especially in the current circumstances) and how much that is worth to them.
#2. Add Value, Not Cost
Another alternative to discounting is to identify what additional value you can provide for your clients that enables them to move forward in their lives or their business.
This is about ADDING value rather than DISCOUNTING the price.
However that doesn’t mean offering more hours.
Instead I recommend adding value with things that don’t require you to add extra cost or spend additional time.
For service based businesses this could be supplying additional resources, templates, e-books, workbooks, videos, online courses etc.
Basically any reusable content you already have or could create and share multiple times that provides additional value for your clients.
For product based businesses, especially during lockdown when shipping is on hold until it's lifted, an example might be to remove the shipping fee from any orders that are placed during this time. This would encourage and reward people for making multiple purchases (thereby increasing your revenue) while you only incur the one shipping fee as you’ll ship all the orders together when you’re allowed to do.
TIP: One quick way to figure out what you could offer is to think about what challenges or experiences your clients are going through right now and what’s one thing you could offer them which would help solve that problem? Find or create that resource then share.
Now, if you’re in the situation where clients have been financially impacted by the current circumstances, and they're having to cut back on their costs in order to stay afloat, what else can you consider?
Another option to consider is:
#3. Reduce the Scope, Not Your Hourly Rate
Ultimately the goal is to MAINTAIN as much of your current revenue as possible.
Failing that, the next priority is to at least RETAIN your current client engagements, even if that means a temporary reduction in revenue in order to do so.
Some businesses right now may not need the same level support as they were getting previously.
So rather than continuing to offer or deliver the same amount of work but for less money (aka discounting), I recommend looking at what core service you can offer right now and how efficiently can you deliver, it thereby reducing the cost but NOT your hourly rate.
This is called reducing the scope.
Yes it means you’ll receive less revenue (which would be the same if you were to discount), but you're maintaining the perceived value of your time and expertise, which is super important.
It also makes transitioning back to full service (particularly for those of you with ongoing engagements) much smoother and less awkward because it's now about moving back to providing your full service rather than "putting your prices up".
TIP: to figure out what a core service (without bells and whistles) might look like, ask yourself if you could do just ONE thing for your client that would make the biggest impact for them right now, what would that be?
You can read more here: How To Create Profitable Services More Clients Can Afford
and again this is something we cover in detail in How To Nail Your Pricing And Pay Yourself What You're Worth
#4. Offer a Payment Plan
If you usually work on full payment or deposit upfront and remainder on completion, you could also consider offering a weekly or monthly payment plan.
This is where you spread the cost across multiple weeks or months, making the individual payments smaller and therefore easier for your clients to commit to.
The risk here is that the client defaults (aka cancels) on later payments so you need to weigh up that risk vs the opportunity to secure more revenue.
TIP: If you offer payment plan avoid having it spread over too long a time (eg. for a service that is delivered in under 6 weeks, 3-4 months payment plan is about as long as you'd want to go). Also make sure you’re protected in your terms & conditions, which should include the use of debt collection agency and recovering any fees incurred from the client if necessary.
Now, if you’ve tried all that - emphasised your value, added “free” resources, reduced the scope and offered a payment plan - but you STILL feel you need to offer a discount here are things you need to consider to do this as safely as possible:
#5. Discount The Total NOT Your Hourly Rate
If you find yourself in a situation where you want (or need) to offer a discount DO NOT discount your hourly rate (this applies to fixed price packages as well as charging per hour).
Only ever discount the total.
Also, just like in school, always show the workings out.
For example, if the original price was $500 and you’re offering a 10% discount, on your quote or invoice show the original $500, plus the $50 discount, as well as the final total of $450.
This establishes that:
1. You’re still WORTH the full amount.
2. Your client is familiar with how much your service usually costs (making the transition BACK to the full price much smoother), and
3. Your client is fully aware of just how much of a discount they are getting meaning you get the “brownie points” for it.
#6. Make Sure The Discount Is Temporary
Always put a time frame on how long the discount is for (eg. “Until [insert end date]” or “For the next [number] months”).
So any discount you offer should be temporary and have an end date (even if you later choose to extend it).
This is important so you don't get into a situation where you've established a new normal that doesn’t work for you and your family.
Because as a business owner, you have a responsibility to yourself and your loved ones, as well as your clients and the people you serve, to make sure your business stays viable so you can stay in business.
That means being paid enough to cover your bills and pay a salary, working the hours you have available.
If you set yourself up in a way that means your business is no longer viable, then you are doing yourself, your loved ones AND your clients and the people you serve a massive disservice.
Do what you need to do to survive this temporary period, but be ready to thrive again when it’s over.
And remember I'm here to help.
If you're struggling with your pricing or what you should be charging during this time, let's just on a call and get you unstuck.
No charge, No sell, Just help.
Find a time that works for you here: Book In Your FREE 15 Minute Trouble-Shoot
Because you ARE worth it.