I’m sure your business is going well, but what about potential clients? It’s tough out there and you’ll be approached by companies demanding a discount. That’s their prerogative, but should you agree? Never!…
1. Whatever your price, someone can do it cheaperIf you’ve set a fair price, why should you drop it further? If you discount by 5%, the client will demand 10%. Give them that, and they’ll want more. Whatever your charges, there will always be cheaper alternatives. You have less expensive competitors. The client may know students or family members willing to do it for a few dollars. They can do it themselves for nothing but time. However, they are negotiating with you because they need your services — don’t be afraid to charge accordingly. Clients may also promise you future projects or recommend your services to others. Great … you can consider discounts or commissions when that work starts rolling in. You don’t need to offer it on day one.
2. Cancellation costs your client moreOnce you reach the negotiation stage, the client has decided to do business with you. You may be their only option. If the project falls apart, the client will need to start negotiations again with an alternative supplier. There’s no guarantee they’ll be better or cost less than you. In my experience, the biggest hagglers have an inflated opinion of their own business prowess. They’re also the ones who panic most when you suggest terminating the deal.
3. It devalues your serviceIT development is a highly-specialized skill. You cannot teach someone to program — they must do it for themselves and it can take many years to become competent. Even web development masters such as SitePoint readers must continually learn to stay on top form. If development were not a sophisticated intellectual exercise, anyone could do it and prices would tumble. Until that day arrives, there’s no need to devalue what you do.
4. Hagglers are hassleAlarm bells should ring when a client demands a fixed price or discount prior to discussing their project. In general, these people don’t understand what they need. Similarly, there will be clients working to tight budget constraints. Sympathize by all means — but they’re never going to build a better Facebook for $2,000. It’s not your problem. Those who bombard you with demands before the project commences won’t stop when agreement is reached. They’re usually the ones who increase scope or change direction on a daily basis. They only go quiet when payment is due… Unreasonable clients will sap your time, energy and profits. Will you miss out on better projects while you’re working for them?
5. But you can lower costsThere’s no need to take offense or be arrogant toward clients requesting a discount. There’s a simple way to agree with all their demands: remove project features and services. Obviously you should warn that a premium may be charged for maintenance on their half-completed systems. Under what circumstances would you offer a discount to a client?
Frequently Asked Questions (FAQs) about Pricing Strategies
Why is it not advisable to drop prices?
Dropping prices may seem like a quick fix to boost sales, but it can have long-term negative effects on your business. It can devalue your product or service, making it difficult to raise prices in the future. It can also lead to a price war with competitors, which can erode profits. Instead of dropping prices, focus on adding value to your product or service to justify the price.
How can I add value to my product or service instead of dropping prices?
There are several ways to add value to your product or service. You can improve the quality, offer exceptional customer service, provide additional features or benefits, or create a unique selling proposition that sets you apart from competitors. By adding value, you can justify your prices and attract customers who are willing to pay for quality and value.
What are the potential consequences of a price war?
A price war can lead to reduced profits, as you have to sell more units to make the same amount of profit. It can also devalue your product or service, making it difficult to raise prices in the future. Furthermore, it can create a perception that your product or service is cheap, which can deter customers who value quality over price.
How can I respond when a customer asks for a discount?
Instead of immediately offering a discount, try to understand the customer’s concerns and address them. Explain the value and benefits of your product or service, and how it justifies the price. If the customer still insists on a discount, consider offering a value-added service or feature instead of a price reduction.
How can I maintain my prices without losing customers?
The key is to communicate the value of your product or service effectively. Make sure your customers understand what they are paying for and how it benefits them. You can also offer exceptional customer service, which can make customers more willing to pay a premium price.
What are some strategies to avoid dropping prices?
Some strategies include adding value to your product or service, improving customer service, creating a unique selling proposition, and effectively communicating the value and benefits of your product or service. You can also consider offering value-added services or features instead of price reductions.
How can I raise my prices without losing customers?
Raising prices can be tricky, but it’s possible if done correctly. Start by communicating the reasons for the price increase to your customers. Explain how the increase will allow you to provide better quality, service, or value. You can also offer options for customers who are not willing to pay the higher price, such as a basic version of your product or service at a lower price.
How can I compete with competitors who offer lower prices?
Competing on price is not always the best strategy. Instead, focus on differentiating your product or service, offering exceptional customer service, and communicating the value and benefits of your product or service. By doing so, you can attract customers who are willing to pay for quality and value, rather than just the lowest price.
How can I justify my prices to customers?
Justifying your prices involves effectively communicating the value and benefits of your product or service. Explain how your product or service is superior to competitors, how it meets the customer’s needs, and how it provides value for the price. You can also highlight any additional features or benefits that justify the price.
How can I increase sales without dropping prices?
Increasing sales without dropping prices involves adding value to your product or service, improving customer service, creating a unique selling proposition, and effectively communicating the value and benefits of your product or service. You can also consider offering value-added services or features, or creating promotional offers that do not involve price reductions.