It’s that time of year when your portable sanitation business is in full swing and, hopefully, the phone is ringing every day with customers who want to know about your services for a home construction site, a weekend party or a local special event.
Getting the call – with effective marketing driving potential customers your way – is half the battle. Now you lay the groundwork by finding out the particulars about the job … How many units, how frequent the service, would you like a hand-wash station with that order? Every interaction with a new customer goes that way.
So you review the customer’s needs and throw out your price for the job.
More and more in budget-conscious times, the next thing out of the customer’s mouth can either kill the sale or shave your profits down to almost nothing. With so much competition for business these days, you’ve come to expect the response. The customer asks for a discount.
What’s your next move? Do you count up the greenbacks in your head and quickly say “Yes’’ as long as you’re making a few dollars off the deal? After all, a new customer is nothing to sneeze at, and maybe you can get them to pay full price the next time around.
Or do you balk at the attempt to drill down your prices, quickly say “No’’ and hang up the phone? Many good contractors believe their price is the right and fair price and stand their ground. On the plus side, you will prevent working for nothing if you stick to your guns, but you most likely won’t get a second shot to land that customer.
Maybe there’s another approach to customers who want you to sharpen your pencil and drop your prices. Andrew Sobel, an expert in customer loyalty, and author with Jerold Panas of the book, Power Questions: Build Relationships, Win New Business, and Influence Others,’’ recommends countering the pressure to discount with several key questions of your own.
WHY DO YOU ASK?
“Clients ask for discounts for different reasons,’’ Sobel said in a recent interview in support of the new book published by Wiley. “If you can find out why your customer wants a discount by asking the right questions, you may discover that you can give them what they need without having to undercut your own bottom line.’’
First things first, rather than answer with a concrete yes or no, Sobel says you need to find out why the customer is asking for a discount. Determining the motivation will help you decide if you want to fight for the business in hopes of building a lasting business relationship or get off the phone as quickly as possible and hope to never hear from the caller again.
Here’s how Sobel defines the four types of customers who seek discounts:
Red Ink Clients. These clients are in genuine financial trouble. If this is the case, you need to know the full story.
RFP Czars. Some clients want to bid every project and will seek out the lowest possible price. They believe you are a commodity. GE is notorious for this.
Bargain Hunters. This type of client always wants to feel you’ve given them a deal, even if it’s just a small concession.
Chicken Littles. 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.
“First, you’ll find out what kind of discount seeker your client is,” Sobel says. “Second, you’ll force your client to reflect on the value you bring to the table and how your business is different from other businesses. Finally, you’ll illuminate what the client really values, allowing you to potentially renegotiate the engagement in a way that preserves your profitability.”
GETTING TO KNOW YOU
The following are some of Sobel’s suggested questions for discount seekers and your reason for asking them:
To kick-start the conversation: “Before I respond, would you mind if I asked you a couple of questions so I can better understand your request?”
To dig deeper: “Occasionally a client requests a discount, and I find I am able to be more helpful if I understand why they’re asking for one. Can you say something about why you think my fee is too high and would like a reduction?”
To size up your competition: “I know you are talking to other service providers about this project. Do you feel my price is dramatically out of line with the market?”
To say “No” while identifying possible terms for a positive negotiation: “I am able to reduce the price when the scope and breadth of the proposal are also cut back. Would you like me to prepare an option for you that would do that?” Or, “We are able to reduce the price in exchange for terms and conditions that help lower our risk and long-term cost of doing business with you. Would you like me to develop a proposal for a long-term supply arrangement with built-in discounts for guaranteed volume levels?”
To learn more about your client’s buying process: “Where will the budget come from for this? Who can give this final approval?”
To accentuate the value you are offering and clarify what is most important to the client: “I’m not sure we had a thorough discussion about the benefits you expect from this. Can we review those, as you see them?” Or, “What parts of this proposal are most important to you? Which aspects of it do you find less valuable?”
To differentiate yourself from the competition: “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.”
To tie your proposal to your client’s higher-level goals: “Can we review one more time what your goals are here? What are you hoping to accomplish?”
To go toe to toe: “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?”
FIND THE KEEPERS
If you don’t delve further into the reasons the customer is seeking a discount, you might miss that diamond in the rough, a customer who can be swayed to understand that your quality products and services are worth paying a profit-sustaining price. After all, isn’t one customer who’s convinced about the value of paying your asking price worth 10 customers who are continually price shopping? You can’t afford to lose out on customers who are ultimately quality-conscious.
“The goal here, of course, is to preserve and strengthen the client relationship – assuming it’s a client you’d like to keep,” Sobel says. “If you’ve priced your services properly, you cannot afford to discount. But if you simply say, ‘No,’ he might head for the door and never come back. By using power questions, you can delve deeper into his situation and his needs. You might find another way you can show him the value he wants. In the long term that will be viewed much more positively than a one-time discount and is a much better option than turning him down completely.”
