If you sell any kind of service, you’ve probably heard this from almost all clients: “Can I get a discount?”

It’s human nature. Everyone loves a discount. And businesses are increasingly willing to give them. So, what’s the harm in asking?

When a client asks for a discount, we feel tempted to say yes. We worry they’ll go to a competitor. A small 10% discount might help us land a valuable client.

Sometimes, we see discounts as a loss leader. We think if we offer a low rate now and do a great job, we’ll get more work from them. Those will be at good rates. So, a small discount now could mean big profits later.

But this is not how you should handle discount requests. If your initial price is low, clients will see you as a cheap option. You’ll find it very difficult to raise prices later.

If you give a discount once, clients will always expect one.

There’s a lot of advice on handling discount requests. You can ask why they want a discount, show your value, or explain why you don’t offer discounts. These are all good tactics.

But the best strategy I’ve found is from Kevin Doolan’s book, Mastering Services Pricing.

When a client wants to negotiate your price, it’s a good sign. It means they want to work with you. If your work isn’t low-skill routine work, clients usually negotiate only if they see you as their favourite choice.

They’d just like you to lower your cost to match the cheapest supplier. From their perspective, they lose nothing by asking.

Don’t give in to their demands. We all want to keep our clients happy. But agreeing to discounts can make you seem dishonest. If you quickly lower your fee, it might seem like your initial quote was inflated.

The client won’t be pleased. They’ll feel cheated and think they could have asked for an even bigger discount.

So, don’t lower your fee. If you do, as Kevin Doolan says:

You are letting your competitor, probably even the one who is doing the worst job in the industry (and therefore has to charge less or they simply won’t get any work at all), set the lowest price at which your services are going to be sold.

Here’s what to do instead:

You need to create a situation where you are not discussing prices directly.

Instead of giving clients a quote for the full project, break down the project into sections. Explain as clearly as possible what work you will do and how much time each section will take. Provide specific costs for each section. 

The first few times, it will take some thought and time to create a full breakdown. But it’s worth it. Your client will be able to see exactly what they’re getting.

When you are setting prices, avoid round figures. Use precise amounts like $9,540 or $1950. These look more calculated and justified.

This won’t stop clients from negotiating. If they ask for a discount or say your price is over their budget, explain that you can’t deliver the full scope of work within their budget. 

But you can adjust the scope to fit their budget. For example, you can remove or scale down certain items. Go through the proposal with the client and trim the scope accordingly.

According to Kevin Doolan:

In my experience, there are two approaches that clients will use. One is to go through the quote with you, on an item-by-item basis, and either argue about the amount involved (‘I think that £22,600 is too much for the due diligence work’) or about the necessity for the item at all (‘why am I being charged £1650 for pensions advice – I don’t need that’). 

(To deal with this situation) you can remove whole items: ‘OK, let’s not do any pensions work on this case. I’ll let you cover that in-house’; or reduce their size: ‘You are going to need due diligence, but if I limit that to high-risk issues (over £100,000) then I could cut the cost from £22,600 to £16,220’.

Now, you’re discussing the amount of work you’ll do. You are not haggling over price.

Clients might still ask for a discount. If you don’t want to lose them, give them a small discount. But ask for something in return. This could be faster payment terms, additional work, a video endorsement for your marketing, introductions to potential new clients, a detailed review on a review platform, or anything else that helps your business grow.

If you give a discount without getting something in return, it’ll only encourage them to keep asking for more.

Don’t create a discount culture in your company. And don’t compete on price.