The discount trap

A prospect looks at your fee and asks the question every firm owner recognises. Is there any movement on that?

You want the client. The number was always a little bit soft. So you take five per cent off, they say yes, and everybody moves on.

It feels like a small thing. It is not, and the cost is not really the five per cent.

What you have actually taught them

Think about what just happened from the client's side.

They asked whether the price could move. The price moved. Nothing else changed. They did not have to give anything, commit to anything, or accept less.

They have learned one thing, and it is a durable thing: asking works.

You have not won the client. You have trained them.

So they will ask again. At the renewal. When you quote for the extra piece of work. When you put your fees up in two years and they wonder aloud whether that is really necessary. Each time, they know from experience that the number is soft, because you showed them that on day one.

It quietly damages both sides

The obvious cost is the margin. The less obvious one is what it does to the relationship, and it works in both directions.

They walk away pleased, but with a question in their mind. If it moved that easily, what was the first number? Could they have got more? Is the real price the one they are now paying, or is there another one below it?

You walk away having won the work, and wondering whether you left money on the table.

Nobody actually feels good. A negotiation where one side folds immediately does not produce confidence in either party.

And there is a signal problem underneath it. Price is one of the few things a prospect can read before they have experienced your work. A fee that drops the moment it is questioned says something about how much you believe in it, and by extension how much you believe in what sits behind it.

The rule: never move for nothing

This is not the same as never discounting. Discounting is fine. Discounting for free is the problem.

If the price comes down, something has to come the other way. Then it is not a discount, it is a deal, and both of you know what happened.

My own version is simple. Five per cent off for clients who pay annually in advance.

That is a genuine trade. They improve my cashflow and remove twelve payment events and any chance of a failed direct debit. I reward them for it. Nobody is doing anybody a favour.

Other honest trades exist. Getting their records in early. Moving onto the software you actually want to work in. Taking a longer commitment. Introducing you to somebody. What matters is that the client gives something in exchange, so the lower price is attached to a reason rather than to their willingness to ask.

What to say when they ask

You do not need a clever line. You need to not fill the silence.

Most fee objections are not objections. They are a reflex, and a surprising number of them evaporate if you simply answer the question honestly and stop talking.

"No, that is the price for what we have described. If you want to bring it down, the way to do that would be to take the lighter option, which does not include the year-round support." That is a complete answer. It is not defensive, it is not apologetic, and it hands the decision back to them with a real route to a lower number that does not cost you anything.

Which is, incidentally, the strongest argument for giving people options in the first place. A prospect who is presented with one price can only negotiate on price. A prospect with three can move to a different one, which feels to them like getting what they wanted and costs you nothing you had not already agreed to sell.

The exception worth naming

There is one situation where dropping the price is right, and it is worth being clear about it so you can tell the difference.

Sometimes you quote and the prospect's reaction tells you that you misread the job. They are smaller than you thought, or the work is narrower, or they want something other than what you scoped.

That is not a discount. That is a re-quote for a different piece of work, and it should be described as one. Say what you now understand the job to be, and price that. The number happens to be lower because the work is different, not because they pushed.

The distinction matters because the client hears it. "I have taken some off" and "that is a different job, so here is what that costs" leave them in completely different places.

Guarding against the quiet version

Most discounting is not a moment of weakness in a meeting. It is a slow drift. A bit off here because they are a nice person, a bit off there because the last one felt expensive when you said it out loud, and within a year your list prices have become opening positions.

That is why it is worth having your prices come out of a system rather than out of your head on the day. Not to remove your judgement, but so that when you do move, you can see that you have moved and by how much.

In Power Pricing an annual-payment discount is a setting you switch on if you want it, and it is off by default. That default is deliberate. The list price should hold its shape, so that a discount stays something you chose to give in exchange for something, rather than something that erodes.

Never give a discount for free. Trade it.