How good a strategy is to lower the prices of your services to create a strong customer relationship?
A lot of Pros and Cons to it. But does offering discounts really helps customers understand your worth? or do you simply come across as 'too easy'?
It's not a matter of coming across as 'too easy.' Rather, discounts offer a slippery slope to mediocrity. Your real challenge is to design a product or service that delights your customers, so much so that they are wiling to pay more, not less.
This is a great question, and one that has many different opinions attached. In my opinion, if your company chooses to lower its prices to gain customers, customers and clients are going to start checking prices against competitors. Whereas, if you focus on the value you are providing, price becomes secondary or a non-issue. Offering a promotion is one thing, but look at Apple in comparison to its competitors. Apple positions itself as a 'premium brand.' They stand for high quality, ease of use, and a unique customer experience. Those interested in the value that Apple provides are more than willing to pay a higher price for that value, which raises their quality of life.
Ramit Sethi has lots of material on this. He says it's better to work either for free or for high rates, not for low rates.
there is info somewhere on this blog:
offer customer loyalty points that convert to something tangible, like a discount, but I would not advise you discount your product outright as once you sell it cheaper, you're gonna have a real problem raising the price. You might also consider the "freemium" model. Offer basic functionality for free and charge for upgrade--if you do this, make sure your customers can see on the free model what the upgrades are (offer demos, etc) but not access those services without a license agreement.
Bad idea unless your strategy is to be know in the market as the price leader. If not, low pricing is a bad idea. Now, you can use customer discounts as a reward, but again as a part of a bigger strategy.
One other thing Muchela, pricing is a tactic to a strategy, not the other way around. So, always know WHY you are lowering pricing before you ever do it! - Dino
In my experience, by lowering the price of your services you devalue your offerings. The same holds true for advice. A simple example is as follows: If you provide advice to a client over lunch or drinks, that client may understand but not act on it. However, is you charge that same client $10,000 for the same advice, you can bet that he or she will present it to his/her Board of Directors.
why would you want to undo a "value" based relationship and turn it into a "who has the lowest price" focus?
Seems like your real need is to reconnect with your customers, new folks there, new dept heads, changed decisionmakers, influencers and resell and get commitment to the value you offer v the costs in time, operations that your service offers.
Total cost, not price per unit or the bottom line bill is where you need to keep your customers focussed.
Do you do a quarterly report on that for key "users" and the decision makers so they realize your value? You should do that proactively. If you do not, competition can sell a cheaper "price" because value is not the consideration used to pay for your company's offerings.
Neil Licht, ndlicht, discussions,finding paying customers
A popular question here with many very good comments! My perspective would be that whatever price would maximixe profits would be the way to go. Perhaps a crystal ball will help. Unfortunately, this is impossible to know without 20/20 hindsight.
Invariably and without exception, I have found that my best customers never haggle with me and the ones who are the most problematic are the ones I give a discount to. Value your time and your work, or nobody else will.
I think you should only discount your fees for a specific reason and length of time - new customer, for example, etc. and of course let the client know it's a discounted rate.
I think the premise that lower your fees creates a strong customer relationship may be faulty. Either you believe your fees are commensurate with the value you deliver or you don't. If the client only thinks your worth 75% of what you charge (or more correctly that the value to the client of the service you deliver is only worth 75% of what you normally charge), then all the discounting in the world is not going to make the relationship strong... and if you charge one customer full fee and another 75% fee, well you're asking for trouble.
In my business I do not have a set fee schedule because the need I cover varies from client to client. Thus I can propose whatever I think is a yes-able value proposition.