This question is seldom encountered and when I am faced with it, the answer I give is usually in the form of a question. Many small business owners have been or will be faced with a request for discounts on products or service. I will address this issue by looking at the different categories of people that might ask for a discount.
- To me, the most bothersome are “friends” who feel that their friendship should be paid back by way of discounted or free products or services. I find that those who give in to discount requests do so because they want to be perceived as “good guys”. The solution is to establish a “friends & discount” policy and stick with. In my experience, few of these “friends” offer you anything of equal value in return. My recommendation for this group is no discounts.
- Another group to consider are the people who are major referral sources for your business. They may not even ask for a discount, but you may feel a need to give something in return. In this case I recommend a written policy stating who qualifies and what the discount is. I don’t believe in giving discounts with the hope that new business will be referred to you.
- Parents and children. This is a special group and if economically possible, discounts should be offered. Family is the heart of our lives and should be treated as such. No, I did not include any other family members; I place them in the “friends” category.
Having to negotiate the value of your products or services with those that ask for discounts, devalues your business. If your prices are fair for the value provided, why offer discounts? Every time you discount, unless your budget is based on discounted prices, you are not meeting your financial business goals.
Although this may be a small issue, it’s one that should be addressed. Every business should have a written policy with regards to discounts and it should be adhered to. Sometime the fear of losing friends is so great that the policy is broken. My question is, “Do you really need that kind of friends”?
If your pricing is developed based on your costs, the value provided, and market rates, then there is no need to discount.
Sometimes small issues are the most bothersome, address them as they occur.
Nick J. Petra CFP Increase your chances for not only business survival but robust growth by subscribing to this blog and being among the first to learn about the new business revolution coming the second quarter of 2013 www.strategicduck.com