In today’s busy world of entrepreneurship and the competitive climb to the top of the leadership ladder, it can sometimes seem like a good deal to offer your services at a premium to gain a new client or seal the deal on a pending project; however, discounting your services to increase clientele is one of the most detrimental ways you can determine the quick fate of your business.
Regardless of the industry your business falls under or the type of clients you serve, the point of establishing a small business is to set yourself apart from the competitors and demonstrate to your potential audience why your business is the route to take.
For retail businesses looking to liquidate inventory before a recurrent transition, reducing the price of seasoned goods can be essential in making room for new items while still earning a profit; however, the same cannot be said for companies that generate income by offering a service.
The good news about promoting a service is that it can be continuously updated to meet the changing needs of your clients, unlike last season’s trendy boots that failed to make it off the shelves before spring. By giving your clients the impression that your service is anything less than updated and packed with quality sets the tone that your business lacks overall value. Since time is likely the key tool needed to deliver your services effectively, offering your brand at a discount will only give your clients the perception that you lack the time needed to perform a thorough job.
Time Well-Spent = Money Well-Spent
In addition, the cheaper you offer your services to a client, the less important that client will likely seem to your company. Think about it – If you have a client that is willing to pay you $45 an hour to assist them with web design and development, chances are you’re going to take their webpage seriously and will dedicate the time and effort to ensuring a project well-done. On the other hand, if you pitch the same services to a client and charge them half of what you charge Client A, you can expect to spend about half as much time and likely even less effort on coming up with a finished product.
You may not realize this, but the time and effort you spend on a project is directly reflected in the completed assembly. A webpage that lacks half the features the client initially asked for is a dead giveaway that the project itself was of little value to the company. Not only are you likely to lose a potential client, but you may even earn yourself a nasty review and a drop in your reputation if you aren’t careful about the projects you agree to and the prices at which you work for.
You might find yourself thinking “If I can retain Client B through my reduced prices, isn’t a loyal client providing consistent work over a longer period of time a greater turnout than a one-time client willing to pay more?” but think again. Once you establish a price for the services you provide, it is exceptionally difficult to negotiate a higher rate of pay. First impressions are important and you want to give your clients all the more reasons to trust that your company offers a greater amount of dedication and quality than your competitors.
Retaining a client for one or two additional contracted projects at a lower rate isn’t building your client’s reputation or earning your business any more money. It’s establishing a presence with your prospective audience that your business is worth less than your competitors and that you’ll work for next to nothing for the bare minimum a task requires in order to appear complete. Take a look at the mathematical breakdown in the difference of charges and workloads between Client A and B mentioned above:Not only are you spending more time on your second client, you’re making nearly a third less to do virtually twice the work.
When Is Discounting a Good Idea?
There are times, of course, when marketing your services for a reduced rate are beneficial to building your brand. If you are in the process of negotiating a contract with a high-profile client or are contracted for a fixed amount of work per week or month, offering your services for a reduction in the initial cost can help persuade your prospective clients to conduct business with you if you offer the first five hours or $100 worth of services for free. (To offset the deduction, many small businesses and freelancers implement a retainer fee for ongoing projects). Much like many retailers offer coupons for a fixed amount of money off provided that you spend a minimum, offering a premium for a fixed amount of work can show your clients that you’re committed to generating their business and are less concerned about your own paycheck than you are the services you are providing them with. Also, they will appreciate that your business is willing to offer perks to loyal clientele and are likely to refer to you colleagues and friends who may be looking for a similar service.
Maintaining confidence is key to operating a successful small business. Growing your company takes dedication, endless effort and a fierce mentality that quality is your top priority. The more serious you take your services and the conditions in which you work for, the greater chance your clients will feel the same.