Last week I spent a full hour talking about discounts with a client. Almost every client in her gym had a discount–mostly just 10 to 20%–and it was killing her. With a profit margin below 20%, she was actually losing money on many clients and we were working to fix her business.
She asked me, “What do you say when people ask YOU for discounts?”
I had to admit that I didn’t know. People don’t ask me for discounts.
“But WHY?” she asked. Was my city so affluent that no one cared about price? Are Canadians too polite to ask? But none of these are true.
The reason people don’t ask for discounts is because I don’t give discounts. If a firefighter gets 15% off, it’s logical to ask, “How much off for a teacher?” because the comparison changes from “Full price vs. 85%” to “Firefighter vs. teacher.”
One of my favorite Seth Godin analogies is on the value of ten dollars. To paraphrase:
Go to a bus stop and wave a $10 bill around. Say to everyone:
“I’ll sell you this ten dollar bill for a dollar.” And no one will buy it. Why? Because they think you’re crazy. They don’t trust your math or your motives.
Now try this: put ten dollars in your neighbor’s mailbox. Do it again the next day, and the next. On the fourth day, ring his doorbell and say, “I’m the guy who’s been putting $10 bills in your mailbox. Do you want to buy this $10 for a dollar?” Of course he’ll say yes.
The value of the bill hasn’t changed. But the perception of the giver has.
When a new client comes to Catalyst, they’ve already been given a few $10 bills through blog posts, podcasts, videos or other interactions They know my $10 bill is really worth ten dollars.
There are hundreds of gym owners in the private Two-Brain Business Facebook group. Some have had to scrimp and save to pay for it; others were already making hundreds of thousands per year. None have ever asked for a discount.
The value of your service is not self-evident. No one will seek you out until they understand the value of your service. Tell them.
(Seth is on Tim Ferriss’ podcast this week. If you don’t have time to read his books, listen to him speak. Then you’ll find time to read.)