What’s more enticing to customers new and old than a sale? Many an independent professional looking for a way to boost business has decided to offer a discount on their products or services. But is discounting really a smart way for solopreneurs to bring in more customers?
Unless you are a large, established company, discounting your service or product can actually do more harm than good. While strategies for effective discounting exist, the general consensus remains that it’s better for independent professionals to gain new business through quality work and a solid marketing plan than through slashing prices.
There are several reasons why discounting is not generally seen in a favorable light. The following four are the most persuasive against the practice.
Discounting carries certain connotations with it that you most likely do not want associated with your business. It’s simply a fact that expensive products and services are perceived to be higher-quality than lower-cost ones. By offering a discount, independent professionals can unintentionally be telling customers that what they have to offer is not really worth the higher price – or that no one is willing to pay that higher price for it.
Typically, the deeper the discounts, the more desperate a business seems. If your competition catches wind of your sale, they may go on the offensive, sensing weakness, and either offering even lower prices to undercut yours, or spreading the word that you’re in trouble.
Even if you promise yourself it won’t happen, it’s unavoidable – bringing in less money means cutting back on either the raw materials or the time you can devote to any one project. An independent professional who makes products may have to use lower-quality materials in order to get the job done and still see a profit. One who provides a service may have to book more appointments in a shorter amount of time in order to see a reasonable return, spending less time on each client. Either way, corners are cut, and the end result is less than your best work – which reflects badly on your business and leads to fewer long-term or repeat clients.
In order for your business to grow, you need to attract more clients who are willing to pay full price. By offering a discount, you instead attract clients who are looking for a deal, and who will not necessarily remain loyal to you if they find a cheaper offer elsewhere. On top of this, your existing clients will grow accustomed to the lower prices, and may not happily return to paying full price, once they’ve seen that you’re willing to negotiate.
It’s clear that offering discounts is usually not in the best interests of an independent professional; however, there are ways to make it work. By offering small discounts aimed at gaining repeat business, such as percentage off your next project, solopreneurs can encourage clients to return. Bundling packages of products or services in order to obtain a discount can also be effective, since it raises the value of the transaction.
But even with these tactics, caution should be exercised. Discount too deeply or too often, and the above scenarios once again begin to apply. The best solution? Charge clients what you’re worth – and you’re always worth 100%.
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News and notes for independent professionals and their clients. This is the October 17, 2016 edition.