It’s not unusual for clients to ask for discounts on your products and services, especially in the early part of the new year when everyone is still paying off their bills from Christmas. From a client’s perspective, there can be lots of reasons to ask for better pricing: a lack of perceived value, insufficient funds, better pricing in other salons or even just chancing their luck.
The danger is when you succumb to discounting it could actually put your business at risk in the long-run. A client who follows the deal won’t be a loyal client. You’ll constantly be on the hunt for new clients to replace the fairweather one-time ones.
WHY TO AVOID THE URGE TO DISCOUNT
1. It lessens the perceived value of your services and products.
2. It complicates your business dealings. When you offer a discount to one client, but not another, you are suddenly operating under different price structures for the same level of service. A variety of pricing levels can create chaos internally.
3. It demonstrates a lack of confidence in your salon. When you start to discount it shows that you don’t really believe your value proposition either.
4. It squeezes your profit margin unnecessarily. Obviously if you sell a product or service at full price, your margin will be higher than if you sell at a discount. The profit margin you have lost through discounting will have to be made up in future trading, which may put your salon under unbearable pressure.
5. It forces you to cut corners. In order to maintain necessary margins after selling at discount, it will prove tempting to find ways to lower other costs. While it is generally a good idea to find ways to reduce overheads, if you feel forced to do this as a result of discounting, you could easily cross a critical line where your perceived value takes another financial hit.
KEY POINTS TO REMEMBER
It’s reasonable for a client to expect the best deal possible, but always remember that discounting can impact on your profi t margin, client satisfaction and your salon reputation. Remind yourself of these fi ve key points...
1Discounting can lead to price wars with competitors and you may not win.
2Discounting can give the wrong impression, as it devalues services and gives the impression the services being offered aren’t worth the full price tag.
3 The negative impact on your perceived quality means a greater chance of your salon both losing creditability and gaining a poor reputation.
4 Discounting puts too much emphasis on price: Instead, rely on quality of service and value for your competitive advantage.
5 Discounting has a negative impact on your bank balance, which can lead to a permanent reduction in your profi ts.
THE DISCOUNT ALTERNATIVES
1. Emphasising value is the best alternative to discounting. Under-promise and over-deliver to let your client know that their return on investment will far outweigh their expectations.
2. Eliminate unnecessary add-ons, without risking the client satisfaction with your solution. These cuts can make the deal possible while allowing you to stay true to your standard pricing.
3. Walk away: Saying ‘no’ is an acceptable answer, which empowers you and gives the client the option of finding a solution elsewhere.
Liz McKeon is a business coach who specialises in the hair industry. For details about business seminars and industry workshops go to www.lizmckeon.com.