Use Power Questions to Handle Discount Pressure
Unfortunately, the easiest and most direct way to increase value (which is benefits minus price paid) is to pressure a service provider to lower their fees. Remember, too, that clients ask for discounts for different reasons. I have observed no less than five types of clients who ask for discounts:
- Red Ink. These clients are in genuine financial trouble.
- RFP Czar. Some clients want to bid every project out. GE is known for this.
- Bargain Hunter. This type of client is always searching for a deal.
- King Commodity. These clients think you are a commodity and therefore only focus on price.
- Chicken Little. Some clients just like to complain about how much everything costs, and don’t actually need a discount to be satisfied. They want to be heard and understood.
Before I go on—there is the school of thought that you should never, ever give a discount without also reducing scope, benefits, and inputs. In principle I agree. But that doesn’t mean you cannot have an effective conversation with your client that goes beyond simply saying “No.”
Your job is to ask thoughtful questions that will:
- Help you determine which type of discounter you are dealing with
- Make the client reflect on the value you bring and how you’re different than brand X
- Illuminate what the client really values
Here some power questions that you might use. Of course, each one might be followed by some additional follow-up questions and/or other affirmations.
You might preface any of these by saying, “Before I respond, would you mind if I asked you a couple of questions so I can better understand your request?”
- “Occasionally a client asks me for a discount, as you have, and I find I am able to be more helpful if I understand what’s behind the request. Can you say something about why you think my fee is too high?”
- Alternative to 1: “When a client asks for a discount, it’s usually because of one of three reasons. First, they may not see the value in the proposal. Second, they feel the price is too high relative to comparable alternatives. And third, they are under genuinely severe profit and budget constraints. In your case, could you share which one it is? Or perhaps it is something else I haven’t mentioned?”
- “I know you are talking to other service providers about this project. Do you feel my price dramatically out of line with the market?”
- “Where will the budget come from for this? Who can give this final approval?” (this discussion may uncover other facts about the buying process that you were unaware of)
- “I’m not sure we had thorough discussion about the benefits you expect from this. Can we review those, as you see them?”
- “Would you mind if I briefly reviewed several aspects of my proposal that I think represent value above and beyond what our competitors offer? I’m not sure I articulated these very well.”
- “What parts of this proposal are most important to you? Which aspects of it do you find less valuable?”
- “Generally speaking, I am able to reduce the price when the scope and breadth of the proposal is also cut back. I know you said you want all of this, but if you had to give up something, what would it be?”
- “We are able to reduce price in exchange for terms and conditions that help lower our risk and long-term cost of doing business with you. What would your reaction be to…” (a proposal for a long-term supply arrangement, guaranteed volume levels, etc.)
- “Can we review one more time what your goals are here? What are you hoping to accomplish?” (It always helps to tie your proposal to higher-level goals)
And finally, from my friend and author Alan Weiss, “Do you give your own customers discounts?” And if they say “Yes,” you respond, “That’s why you need me.” And if they say “No,” you respond, “So why should I?” (not for the faint-hearted, however!)Most corporations are under pressure from their own investors and customers to do more for less. And they are passing that pressure onto you. They want more value for money, plain and simple.