The Price is Right - Residential Systems

You had a great initial consultation with a prospective client, showed them all the testimonials anyone could ever ask for, gave them a professional and well thought out proposal, and then you get the dreaded question…

“We’d love to work with you, but can you do any better on your price?”

How do you respond? Should you discount your pricing?

My opinion is “no,” you shouldn’t discount your pricing. Here are five reasons why:

It Shows a Lack of Confidence. When you know the value of your products/services, you confidently discuss pricing and the value that you have to offer. There is no need to discount because you know you’re worth the price you are charging. Whether you intend to or not, when you discount pricing, you are communicating to the client that you aren’t sure you are worth what you originally asked for.
It Leaves the Customer Wondering If They Got the Best Price. Have you ever negotiated the price of a new car? You drove off the lot wondering if you got the lowest price, didn’t you?

Also by Tim Fitzpatrick: How to Build Credibility and Trust

It’s a horrible feeling wondering if you got the best price, and taints the sales process. You want customers to feel great about their decision to work with you, and discounting your pricing can leave doubt in a customer’s mind.

It Sets a Bad Precedent. When you discount at the beginning of a relationship, you are setting a precedent that you are willing to negotiate and lower your pricing. From this point forward, your customers will always expect it, and if you don’t, they will not be happy because they’ve grown to expect a discount.
It Can Encourage You to Cut Corners. Discounting reduces your profit margins, and to maintain healthy profit margins, you may be tempted to cut corners to save money on a project you sold at a discounted price. Inevitably, cutting corners will lead to lower quality and an unhappy customer. Not good.
It Sets You Up for a Price War. Once you discount your price, the client may start to negotiate with other companies they have received proposals from. Instead of selling on the value you bring to the table, this puts you in a situation where the lowest bidder wins. Trust me, unless you are Walmart, you don’t want to be known as the low price leader. There will always be someone willing to beat your price.

Related: How Low Do You Go?

The Exceptions to the Rule
So, should you never discount your products and services? There are a few cases where I think it’s okay to break this rule.

Discounting to Correct a Mistake. If you dropped the ball and need to discount pricing to save a customer, that’s okay. It shows the customer you are willing to take responsibility for your mistakes and go the extra mile to make things right. Customers will always appreciate this.
When You Want to Reward a Long-Term Customer. When you have a long-term client who has done multiple projects with you at full price, it’s okay to discount a project here and there to show your appreciation. You’ve already established a strong working relationship that hasn’t been built on pricing.

Having said that, I think there are better ways to show your appreciation other than discounting. Throw in something unexpected your client will love for free or buy a gift they’ll love that shows how well you know them instead.

Also by Tim Fitzpatrick: How to Instantly Attract Your Ideal Clients

Alternatives to Discounting
Can discounts drive sales? There’s no question the answer is “yes.” But you will most likely pay for any discounting you do at some point down the road. I think there are better options besides discounting you can consider. Here are a few things to try in the future:

Say “No” and Communicate Your Value. It’s okay to say “no.” Communicate the value you bring to the table and show the client why your price is worth it. Focus on the benefits the client will experience in working with you. They may not be an ideal client if they don’t see the value in working with you.
If the Client Has a Budget to Stick to, Cut from the Job to Stay on Budget. Cutting from the job is an easy way to lower your pricing without discounting. Maybe the client is willing to replace that 70-inch high-end LCD with a 60-inch model, or you can eliminate several pairs of speakers throughout the house. There’re no shortage of changes you can make in a proposal to bring the project in line with the client’s budget.
Add Value to the Project By Adding Elements at No Cost. Isn’t giving something away for free similar to discounting? They may seem similar, but the perception from the customer’s point of view is totally different. Clients are drawn to free products versus discounting, and they have a much higher perceived value than discounting.

You work hard to generate leads and turn prospects into clients. You also need to make enough margin to be profitable and have a thriving business. Discounting your products and services is a slippery slope. I hope this article has convinced you why to stay away from it and what you can do instead. Happy selling!