I’ve had 3 experiences where I discounted my services. In each case, it was a CLEAR mistake that I now finally have the courage NOT to repeat!

1. I discounted my coaching services by 20% for members of my mastermind. Not a bad decision in many ways as they were already subscribers and I was increasing the Average order value. However, since it was MY time I was discounting, I felt less inclined to give them 100% full on great service. I tried to be conscientious but it didn’t help me feel warmly towards those clients.
In retrospect, I should have added an extra bonus that I don’t offer others. Exactly as per your suggestion.

2. When working purely in coaching, I agreed to do weekly coaching instead of bi weekly coaching for a new client. She was a new mum and a single mum and basically negotiated me by a mix of me needing the business and feeling a little sorry for her.
upshot? I worked super hard for her but as she was a single mum with not enough money or time to focus on growing her business, she didn’t get the result we both worked for. I say both worked for – in the calls anyway. She just wasn’t in a position to focus enough to get the result.

In the same situation in future, I’d use this as a warning sign and probably advise the client not to go ahead with their project as they just didn’t have the time/focus to see it through.

Please don’t take this as anything against new mothers or single mothers etc etc. I’m not trying to generalize. I can only go by the specifics of this case, which is that this person just didn’t have the time, money or mental focus free to pursue her project. Not surprisingly!

3. I recently tried (on the advice of another marketing guru who I generally respect at lot) a tactic of booking in 20-minute appointments for FREE to give people a taste of my coaching. I simply set an hour aside one day a week for this and advertised it to my email list.

I tried this over about 4 appointments.

While I did gain a testimonial from this and a single $120 value coaching session (1 hour), overall I felt resentful to these people for taking my time up without giving me value! Also, it just wasn’t a long enough time to give people clear guidance. Plus in all but 1 case, the people turned up without the clear specific question that I had told them they would need to bring to a short session.

Maybe it reflects the low quality of my email list but I just felt I had found a good way to attract people who were either unfocussed, or were too cheapskate to pay me.
To be fair, I did force them to fill in an application form before booking the appointment so it’s not like I didn’t try to filter out timewasters.

I have instead recently simply refocussed on pulling in leads who have to go through the usual application process and pay full price at the end. I’ve recently gained 3 more clients as a result, all of whom are paying full price, and all of whom seem focussed and businesslike.

Thank you SO much for finally putting the nail in the coffin of the dangerous and erosive Discount “Strategy”. This is a “strategy” I actually feel now is a sure fire sign of a LACK of strategies for building brand value and bringing in enough traffic so there is more demand for my time than there is time to give (thus meaning the value of my time has to go UP).
My next client is in fact going to pay HIGHER prices – But I am developing an online course that I can offer as a bonus to give more VALUE.
Win-win.

Thanks again, Derek, been following you for years and you never disappoint. Keep creating the great content!
Michael

But with due respect, I still think Derek is right too.

This raises a few issues. None of which, I believe, mean you have to discount your prices.

1. Quality
If you found a similar quality item at Walmart as at JC Penny, the issue is quality – price relationship. In other words, JC P wasn’t good value at the main price because the quality was obviously the same.
Their price was too high. Agreed. Discounting, however, I don’t believe is the answer.
I guess the solution is: make sure your product/service is of clearly better quality in some way than the competition.

2. Value for money
as above – make sure that relative to the price point, you give better value than the competition. JCP obviously didn’t do that.

3. DIFFERENTIATION
above all, if your product/service is so undifferentiated – either by the niche you serve; the unique services you offer; or the unique personal/corporate brand you’ve created – that you are simply shopped on price, you’re done for anyway. You’re always going to be pushed to low prices.

Again, the solution is not discounting IMHO. It’s differentiation.

Thanks for raising an interesting topic!

We had always offered a lifetime in-home warranty covering defects in materials or workmanship. The product we sell is very robust, but not indestructible. Minor repairs and inspection visits to determine whether damage was a warrantable condition were a daily occurrence. I immediately re-wrote our terms of service to include a standard 1 year warranty. I then put together a package that not only included care products for their purchase, but a 5 year warranty covering those repairs we had been doing. We are self insuring it and selling it for an additional $300 per sale. Our average ticket is about $2700. That means we are getting an additional 11% or so revenue on every sale that the customer opts to buy the package. Our penetration on selling this package has been around 20%. It can be much higher, and will be once our new staff is properly trained.

Here is the result of implementing the new value plan:
1. Less service calls. A lot less. This means less hours for service techs and company vehicles.
2. More realistic expectations from customers. By explaining the program and offering it at the time of sale, the customer has a chance to decide if it brings value to their purchase. They are no longer able to get us to return to their homes without cost to them if they do not have the protection package.
3. Additional revenue to grow our business. We are currently averaging about $10000 per month from the program. We are able to take care of problems, big or small for our covered customers, and not worry about the cost. We realize a net profit of about $6500 per month from it.
4. The chance for residual income. Our customers can renew the 5 year plan every 5 years at the same cost they had on their original sale.
5. Better referrals. Our customers are great for that anyway, but when you can take care of a major problem, satisfy them, and not have your hand out…You can imagine what they’ll tell their friends about your company.

In a nutshell:
We were giving something valuable away. We stopped doing that. We re-packaged what we gave away and now offer something better and charge a profitable for it. We are happier and more profitable for it.

Here’s why: they basically come in with an assumed value on your product/brand based on cheap “competitors” elsewhere on the internet or candyland or wherever else the frig they stomp through. They basically assume that you’re “one of them” but still have some kind of zombie attraction to the the type of business you are running and want your services.

I’ve caved a couple time now and never doing it again. These folks typically turn out to assume that you owe them so much more for the courtesy of them signing up for your service. Yes, they are paying customers, and that’s fine and so I will give them plenty of support, but they are wanting a whole ‘nother level of kiss ass that most people would never assume.

One guy got so bad I just stopped supporting him alltogether. He was literally ripping my support model apart by an unending, constant bombardment of emails and I “fired” him from my service. The dude would take a shower, walk his dog, eat some yogurt, come back and write me 5 paragraphs each and every time. Couldn’t take it anymore, and I am a guy that provides ALOT of detailed support every single day.

All this because I gave him half off. How stupid can I be?

Anyway, Derek, sir, thanks for the confirmation. I like the bonus idea.

Military people are the most likely to ask for discounts. It’s hard for me to see why they think they are entitled to discounts when they are at least gainfully employed, and some of our other customers are unemployed and paying for their purchases with coins they’ve scrounged up.

But I love the point about adding value. I completely agree with this!