Discounting Fees is a Losing Strategy for Professional Services
TLDR: Top 3 Takeaways from this Post:
Discounts on services don’t add value: When you discount, clients may wonder, “Were they ever worth full price?” Protect your value by keeping fees aligned with the quality you deliver. Instead of dropping rates, offer alternative deals.
Discounts come with strings attached: It’s a lot harder to climb out of the “discount hole” than it is to avoid it altogether.
Current clients are your pipeline’s best friend: Your existing clients already know, love, and trust you. Instead of chasing discounts to reel in new business, focus on nurturing those relationships.
It’s the end of the year, and your pipeline looks shaky. As panic sets in, you think, “What if we just… discount our services? That will get clients to close, right?”
Hold that thought. Slashing prices might feel like a quick fix, but it will create bigger problems later.
Let’s talk about why discounting fees for professional services is a one-way ticket to devaluing your expertise and how you can improve your pipeline without undercutting your brand.
The Fundamental Difference Between Services and Products
This post is for businesses selling professional services. As discussed, marketing services is very different from products. Understanding this difference is key to making smarter marketing and sales decisions for professional services.
Products: Tangible items with fixed costs. Discounts make sense when you are clearing inventory or attracting volume buyers.
Services: Intangible, value-driven, and reliant on expertise. Your “inventory” is your skills, experience, and time – and none of those are on clearance.
When you discount your services, you’re not just cutting costs; you’re cutting perceived value. Clients will wonder, “If they’re willing to arbitrarily drop their price, were they worth it to begin with?”
Discounting Myths vs. Facts
Let’s bust some myths about service discounts and get real about what it actually does to your brand.
Myth: A discount is a one-time thing
Fact: Discounts have hidden long-term hidden costs
Giving a discount is like feeding a stray cat – it’s hard to stop once you start. Clients who get a reduced rate today will expect the same (or lower) tomorrow.
Consider a consultancy that discounted fees to close a deal, only to find that renewal negotiations revolved around price rather than value. The result? Diminished profitability, constant renegotiation battles, and a scope of work that is limited to commoditized offerings.
And here’s the kicker: If you discount your fees by just 10%, you’ll need to increase sales by 33% to achieve the same profit margin. (This wakeup call comes from McKinsey & Company.)
Myth: A discount will boost confidence in your value.
Fact: Discounts announce, “We’re not worth what we said we were worth.”
Research shows that higher prices are often equated with higher quality, even when the quality is the same as a lower priced service. Further, research also shows that discounts reduce perceived quality, especially in professional services where value is subjective.
Ouch.
Myth: Existing customers won’t care about discounts for new clients.
Fact: Discounts may alienate loyal customers.
Picture this: You’ve been a loyal gym member for a decade, paying full price. Then the gym rolls out a new deal - free t-shirts, water bottles, and training sessions for first-time customers only. Where’s your shirt and training session? Exactly.
Your most loyal customers are your biggest asset. Make them feel valued before you rust to court new ones.
Pipeline problems? Try These Instead of Discounts
Okay, no discounts. What should you do instead? Here are four ways to accelerate deals without undercutting your worth:
Focus on Customer Retention to Drive Profits: Your current customers already know you, trust you, and value you. Nurture those relationships first. According to Bain & Company, increasing client retention can boost profits by 25-95%. BTW: It costs a lot to acquire a new customer. According to HubSpot, acquiring a new customer can be 5-25x more expensive than retaining an existing customer. Make the most of that investment.
Add Value, Not Discounts: Instead of cutting your price, increase your value. Offer complimentary consultation, additional service, or access to a prized expert. Show customers why acting now benefits them.
Show Off Your Value: Focus on measurable outcomes and ROI. Use data, case studies, and custom insights to prove your worth. Make it impossible for the client to say, “We’ll think about it.”
Offer an Easy Entry Point: If budget is the barrier, offer a scaled-down version of your service like a pilot project to build trust without cheapening your core offerings.
Bottom line:
Lowering your price doesn’t increase your value or close sales. Instead of discounting your services, make a compelling case for them and help your clients see the cost of doing nothing vs. the payoff of working with you now.
Still feeling stuck? Need help crafting a value-driven strategy? Let’s talk about building a value-driven strategy that sets your brand apart. Your expertise deserves to shine – no discounts required.
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