Just Say No to Requests for Ridiculous Discounts
Many a freelancer has slaved over a proposal trying to make it perfect. Figuring and guessing and measuring, trying to find the right balance of WOW and profit.
After hours of penciling out the budget six ways from Sunday, the freelancer presents her proposal. The client reviews it, smiles and says, “This looks great! How about a 20% discount?”
The freelancer is deflated; hurt. A 20% discount? Do they really think she’s not worth the full amount? Don’t they like her? What’s wrong?
Answer: nothing. Nothing is wrong.
By SeeMidTN.com (aka Brent) via Flickr.com
The problem here is that the client expects the proposal and negotiation experience to be one thing and the freelancer expects another.
To explain, let me share a quick story.
My mother loves shopping at a particular department store, let’s call it “Shmohls.”
There is always a sale at Shmohls; always.
Sometimes the sale is a run-of-the-mill 10% off thing, but often the store offers ridiculous discounts of 50, 60 sometimes 70% off. 70%!
I’ve pointed out to my mom that Shmohls jacks up their retail prices to justify all the sales. The savings aren’t real; they’re manufactured.
My mom doesn’t care. She likes the experience of getting a deal.
Freelancers, when you’re working with corporate clients, you’re working with my mom.
Those clients are used to haggling over the price of just about everything they buy. They’re used to being quoted a price that’s inflated and then “getting a deal.” They don’t pay retail. Ever.
So what should you do?
First, I’d seriously recommend you do a bit of research into value based pricing.
Value based pricing is pricing your services based on the value of the end product to the client, not the cost of creating the thing for you.
The folks over at FreshBooks put out a pay-what-you-will ebook on value pricing recently and it’s well worth a read. Seriously, it’ll take you 40 minutes tops. Read it for free and if you like what you find, toss a couple of dollars in the tip jar.
Second, don’t be tempted to inflate your prices to give your clients this false experience.
Why? Being Shmohls requires a LOT of work. You have to have a sale all the time. And you have to juggle what you offered last week against what you can offer this week to make sure the sales you offer don’t undercut your bottom line.
You don’t have time for all that silliness; you’re just one person.
When somebody asks you for a huge discount, respond thusly:
“I don’t like to waste my clients’ time haggling, so I work hard to make sure my proposals are accurately priced from the start. If budget is a concern, though, we can talk about reducing the scope of the project.”
“The margins in my business don’t allow for the discounts large firms offer. What I offer instead is the right service, delivered on time for the right price.”
“I appreciate the need to scrutinize the proposal. Is there work here you don’t think you’ll need? If so I’m happy to resize the project to fit your budget.”
By antwerpenR via Flickr.com
Clients who are used to working with big corporate vendors expect inflated prices and a bit of haggling. Don’t take their requests for discounts personally. Instead, change their expectations and show them that when they work with you they can expect honest prices for quality work.
Categories: Negotiation Strategy
Resizing the scope of the project to fit the size of their budget is the appropriate solution. I heard Jeffrey Zeldman talk about this dilemma before. His reply was “It is better to get a subset of the project right, than to get the whole project wrong.”
I really like your advice to freelancers. It’s top notch.
Thanks, John!
Brilliant, brilliant post. Your suggested response #1 is really the best way to handle it — agreeing to discounts trains repeat clients to do it because it works. For me, reducing the scope of a project isn’t always feasible (or good for the project), so I have another way I usually handle haggling. I typically require half payment upfront and half upon completion, but I offer a small discount for full payment upfront. This helps customers looking for a discount get what they want, while the small amount I lose is worth it to me to be able to skip the second round of invoicing and just be done when the project is done.
Love your blog!
Thanks so much, Sarah! And I really like your idea of offering a discount for full payment upfront: I’m a big fan of providing incentive for a client to do what you want.
A similar approach is offering something called a 2%/10 discount, where if they pay in 10 days they get a 2% discount on the invoice. It doesn’t sound like a lot, but to a medium to large sized company small savings can add up quickly.