A recent NN6 TSP (Team Synergy Protocol) topic highlighted the risks (and rewards) of discounting one’s services. The basic question was: “During a down-turn in the business cycle, what are the pros and cons of offering prospective clients a discount?” The format of TSP enables participants to offer analogous experiences rather than advice, but in the interest of brevity, I will try to distill the essence of these ‘experiences’ into bullet points.

The discussion swirled around the reasons for offering a discount and the consensus was that, unless you are desperate, you should not discount. After all, your services are worth what you charge for them, aren’t they? And, what happens when, after some short period of discounting, you try to go back to your regular published rate? However, there are situations where a discount might cement a relationship which, over time, could be highly beneficial to both parties.

So here are the ‘solutions’ that arose during the meeting: As always, some offerings can be taken and used in concert and some can be mutually exclusive.
1. Put it in the contract. You can offer an ‘introductory rate’ or an up-front discount for a specific time period at the end of which the rate floats back to your regular published rate. There are risks to this approach since many clients, irrespective of their initial agreement, will view the rate increase as unwarranted or even gouging.

2. Put an escalation clause in the contract. See #1 above for the risks.

3. Pre-payment discount. This is a common tactic used by IT services companies. Buy a block of time at a discount from the regular rate and pay a lower hourly rate. The larger the block, the greater the discount. In fact, I offer a discount for annual subscriptions paid in advance. This set of alternatives has the advantage of allowing the client to choose his rate.

4. Charge more for the first 3 months. Often times the first 3 months are the most time-intensive as you work to understand the client’s business or clean up someone else’s mess. Some plans account for this issue by charging more for the first 3 months and then allow the rate to drop back. If you can work this way and perform, you will generally get a client for the duration.

5. Raise your published rate and then discount for everybody. At least in NY, everybody wants a ‘deal’.

6. “Sorry, we never discount” Allow the prospect believe that you have enough business and that they will be the ones who benefit from hiring you (which, of course, is the truth).

7. “If you can’t afford it, I understand” is a ploy that is often used to fend off a discount seeker. Many prospects will go out of their way to deny that they can’t afford your services.

8. The word always gets out. Clients who are paying full price will invariably discover that others are receiving the same services for less. And, even though they agreed to the terms up front, it is human nature to be resentful. Consider the effect of losing a long-term client when contemplating offering a discount to secure additional business. And all agreed that whether or not you discount, raising rates is almost always met with resistance.