Discounts: Keep Your Clients and Your Wallet Happy
When I’m shopping for something, discounts can play a big role in what I wind up purchasing. Whether I’m looking for a host for my website or a graphic designer to put that website together, I’m more likely to choose an option that offers me a discounted price. I’m not the only one who makes purchasing decisions that way, either: depending on your clientele, you’re likely to pick up at least a few new clients with a discount.
Discounts and sales offer motivation for potential customers to buy now: if they want to take advantage of the deal, it’s necessary to act immediately. You can also use discounts to motivate your customers to do all sorts of things, like pay early or try out new services that you’re offering. The right discount can help bring in more money from new projects, if you take a long-term view.
A Few Discounts Worth Considering
The exact discounts your clients will be interested in depends on just what type of freelancer you are, but there are some basic discounts that can work no matter what services you’re offering.
- Customer retention discount: You know the punch cards that many businesses offer to customers that allow you to earn points towards free stuff — as long as you’re a loyal customer? Those businesses reward customers because it’s a relatively simple way to retain customers long-term. You don’t need to offer a full rewards program, but mentioning that you give a discount to clients that keep coming back can help you keep your current clientele.
- Quick payment discount: You may have had the experience of walking into a store and finding two different prices: one for cash and one for credit. If the storekeeper gets money that he can turn around and spend immediately, you get a better deal. Credit represents more of a risk and a longer wait, so the price goes up. You can take advantage of a similar idea by offering clients a slightly reduced cost if they pay up immediately (rather than net-30, net-60 or whatever lengthy terms might be their first choice).
- New service discount: If you’re adding a new service or product to what you offer your clients, you may find that your good work in other areas works against you. If you’ve become their go-to-guy for web design, they might not jump on your offer to take over their copywriting needs. Offering a discount can make a big difference in how soon your clients will give your new service a chance.
Discounts’ Downside
Of course, discounts can’t solve all your problems. If you offer too deep a discount, you can’t afford to complete the project and still eat. And if you continuously offer discounts, you’ll convince your clients that your discounted rate is your normal rate, making it harder to change your rates in the future.
You have to be sure that you can afford to offer a discount before you even start thinking about how it will work with your own freelancing services. However, considering the fact that you can offer as small of a discount as you want, it’s probably worth moving your standard rates to the point where you can give discounts when you want to. That’s not a suggestion to raise your rates ridiculously, but building in padding to allow for sales and discounts can also provide padding if a client is late in paying or similar situations.
You will find that some clients will shop around, constantly looking for bargains. You can offer a new client discount, but in my experience, that just encourages a client to jump ship if he finds a cheaper deal for his next projects. Instead, I try to use discounts in such a way that they encourage clients to keep bringing me business or to convince new clients that a long-term arrangement will pay off.
Some good ideas within the article, thanks for sharing. For me, the customer retention discount works very well lately – I offer it to all past clients since the beginning of this year and they seem to appreciate it so far.
In the end, knowing a client and his expectations already can also save time during the development and so a percentage discount doesn’t neccessarily mean less income in the end.
One thing which also works very well in my opinion is a simple affiliate system rewarding clients who spread the word by giving them an additional discount the next time they need something.
Rather than offer discounts, freelancers with more time than work can devote more time to a given project or provide extra value for the same price. In most cases, discounts please the bean counters but bean counters don’t hire freelancers. You’ll get more work if you do a good job. After all, nobody goes to the cheapest brain surgeon.
I like these suggestions, Thursday. It’s a different angle to the oft-answered question, “If I order X amount, will you drop your rate?” Well, no, frankly – more work doesn’t mean it takes less time, skill or effort to complete.
But a repeat client brings more income than a one-off bulk order client. A new service discount can get people testing and trying, thus increasing good reviews and encouraging new clients. And an up-front payment discount is also nice, because it ensures you don’t have to waste time (or feel uncomfortable) reminding clients that payment is due.
Interesting article. I’m about to start up as a freelancing web developer shortly and was considering offering a 20-30% discount for the first months as an effort to kick-start my business. Any input on this? Is it a good idea, or are there negative effects I’ve not yet noticed? I’m definitely gonna use that simple affiliate system. (thx Max)
Good article, lately with the economy so bad I have been getting some inquires from people wanting sites but with a budget I’m not use to working for. I want to work on the sites and help out but it’s just not possible sometimes, I could offer a super low rate to design and animate but then I still work with my developer who may not be willing to provide as big of a discount as I can. There’s two points to look at this from, first is at least work is still coming in but the other view is if I do take it on it’s almost taking a huge step back and everything I have done to build myself up to this point and my rate gets dropped.
Thanks for the article, Thursday. I love the customer retention discount idea. I’m not fantasizing about the looks of puzzlement on my clients faces if I sent them all virtual punch cards.
JonasW, when I started out freelance writing, I offered a “Two Timer Discount” to repeat customers. This way I didn’t limit myself in income in the beginning and I gave my clients an incentive to stick with me. I still regularly work with three clients from that time (at full price), so apparently something worked. Later though, I wondered if my “Two Timer Discount” gave the impression that my work was so bad that I had to offer discounts to make people come back, so I ended up dropping it from my marketing materials. (Yes, I’m that analytical about it. I think the paranoia comes from working at home alone all day!)
This is great!
One thing that can help to make discounts for your clients a little less painful for you as the freelancer is to find vendors (like printers, hosting companies, and so on) that will give you discounts.
If you are a registered business, many online places will give you “broker” discounts — wholesale! You take a discount and can pass that on to the client. Pretty good way to go.
Great article!
Evan
http://evanmade.com
@Matthew, I strongly agree with you on not going to the cheapest brain surgeon. To which I’d like to add:
Even in these times, consider raising your rates.
To be sure, your work must be good enough to justify the higher fee, but you may be pleasantly surprised at how your business improves.
I really see these as Ideas to get a discussion going with potential and older clients. If you give a discount because it is a long term business strategy then I think its a great idea.
Comments here are also worth considering. I don’t think that there is one perfect solution but the discussion about the ideas really gets the brain working.
This is a great topic. I really like to read everyone’s comments.
I seldom give discounts, but when I do, I ask that the client not tell anyone else that price, because it’s just for them. This serves the double purpose of showing them that their project and business are important to me, but also saves me from the potential of devaluing my services in the eyes of future clients that might come my way (via word-of-mouth) from that client.
@colin I too told my past client to keep pricing information to themselves and even have it in my contract, but clients do talk and one way that they introduce our services to others (word of mouth) is how good of a price they got their designs for, of course plus the service.
Great post Thursday!
@Colin, I like your idea..:)
I think the general idea is to keep a client. Since we don’t have big budget for advertising, this is our way of doing so. I added a post on my blog regarding how to keep a client: http://rtdesign.ca/blog/
I’ve recently developed a few programs myself. First I’ve started a referral program which does work on two fronts. First it encourages the existing clients get a 25% on their next invoice, second it is cheaper than advertising.
I’ve also started giving a 10% discount on early payments. Clients who pay in 20 days get 10% off on their next invoice. Again this serves two purpose, one would be the to get paid faster, as you mentioned, second, this will somewhat ensure keep the existing clients coming back.
I have to say that I just started theses in April, so I don’t have any statistic on it, but I’ve had two clients expressing their interest in early payment program.
Here is the full newsletter I sent out:
http://campaign-archive.com/?u=93c3f2d1cdc48db6978e624ab&id=466b77dacc
Web design is not retail sales. We are not selling the same products for our varied rates. In fact the client often has no idea what the average web design rate is, but they do know what they are able to pay and what they are looking for, and are hoping to get the best website for their price range.
In the end we each set our rates on what we think we deserve, and our clients go with us because we are in their price range overall.
Giving someone a discount for being a first time customer seems odd to me, because all of my clients are first time customers in a sense, so everyone would get a discount. I have kept all of my clients that I have taken on , but after the initial website design or re-design, the work I get from them is usually updates, charged by the hour, even design updates.
Offering a discount, in my opinion to new customers only attracts customer looking for discounts. And these aren’t always the best ones to have. I want customers who value investing in their website and are impressed by my portfolio.
@Alavri with all due respect I have to disagree with “Offering a discount, in my opinion to new customers only attracts customer looking for discounts.” In today’s economy everyone is cutting back on their budget, just because a new prospect is attracted by the first time new client discount, does not mean that they will not be good quality clients or returning ones. I have no idea where this idea has come about and why it is circulating among designers. Some of my regular clients and most respected ones are the ones that came to me because of such offer and the saving that I have passed on to them has returned many folds including new referrals.
Ya giving discounts on the service helps to attract more clients.
And if we strengthen the relationship with the client then he will come back to us surely. Also he can come with some external projects also. This help spread the word about our service and makes the clients happy for getting discounts.
According to me the discounts should be offered for the perticular time period, so the clients will notice that this offer is not available for lifetime making them to make decisions during that period.
“According to me the discounts should be offered for the particular time period”, I tend to half agree with this method. Reason being that no one wants to be rushed, also prospects know all the tricks of the sales trade so they are aware of why the time limit. Whereas if it is open ended and like any other offer can be discontinued at anytime or changed to higher or lower discount rate then that is a plus on getting the word around to others. Just my 2 cents
I personally don’t like to be rushed on my purchases of anything and as soon as I see a limited time offer and if I am not ready then I will not pursue it, no matter how big of a discount it may be. However if I know that I can go back anytime and still be rewarded with a first time customer discount, I will remember to look into it when ready.
@ Matthew
I completely agree. Profit margins is what makes a business successful and stay afloat during a down turn. Cut your margins you are cutting your life line so to speak. Discounts empower tire kickers. A would never bargain shop for a Dentist or a Doctor, why should one bargain shop for a Designer, or Creative that will help if done right propel your business into making more money. If there is a difference in price from a low rung bidder to a high rung bidder and that difference translate into qaulity I would personally be obliged to pay more for something if its quality than scrimp and wind up spending 2 times the amount in the long run. Tire kickers are just that, they usually are not looking for quality rather a good deal. An old business man told me this : “You can have great, you can have fast, or you can have cheap, But you can’t have all together. ”
I will give discounts on long term customers who have come to me over the years time and again, as they deserve that discount. New clients I never give discounts to. To me you must earn a discount by showing you can hold up your end of the bargain being a good client.
Usually if money is the common denominator, I do not want that person as a client as you don’t respect the quality we bring to the table to pay for it. That is fine for some not for us and we kindly pass. Recently I read a great quote “your business grows not by the projects you get, but the projects you turn down.” we have all been in a situation where we know in our guts we should not have taken this project (we did it for the money) and usually it comes to bite you in the ass.
Never sell yourself short.
Beware of sending the wrong message. A discount communicates to clients that your standard pricing is negotiable and is only a suggestion. I am completely with Matthew Stibbe – use the quality of your service offering, or features of your service, or additional services, as tools to increase the value of your offering. Flex on other things, not price. If the client truly demands a lower price, then offer a lower tier of service.
The problem I have with discounts (based on ~16 years of freelancing experience) is that gaining respect and credibility with clients is always an uphill battle for freelancers. And respect is hard to gain but very easy to lose. A discount amounts to winking at your own price structure in their eyes.
There are several great points made in this post and the comments. I like the idea about offering discounts when adding a new service as an initial incentive to try it. And the early payment discount could be a great way to get away from the huge headache that is bill collection. Just increase your rates so the early payment discount is the rate you are charging now. Then while it sounds like a discount for early payment, there’s actually some risk premium built in to the rate for those paying on credit. And finally, the discount (or credit) for referrals is a great way to encourage clients to spread the word, assuming you’re doing a good job.
Freebies are definatley a good idea, ive been offering web hosting and domains free for the first year with every website design, people like it when they think they are getting something extra!
Great Stuff! The ‘pay early’ discount is something I totally endorse and it is right at the top of the list of advice I give to freelancers I coach.
The time-value of money says that a dollar today is worth more than a dollar tomorrow… so motivating clients to pay early can mean you don’t lose out at all!
Cashflow is King.