Hi everyone. It’s Nishi Patel from N-Accounting. And in today’s video, I want to talk about something that maybe some people will disagree with, but I think it’s really important to discuss in business. And that is, essentially, why asking for a discount is always a bad idea and it’s not good value for your business.
So what a lot of business owners have come across, and it’s something I’ve experienced as well, is you could be in a sales meeting with a prospect or a potential client. And at the end of the meeting, you work out a plan. Everyone knows what they need to do. The prospective client can see value in what you do, and you already know the value you’re going to add to that client’s business. And then, at the end of the meeting, they essentially… We talk about the costs involved and the investment involved. And then, sometimes, you get the question back, “Well, is there anything you can do to move on that investment?” And, “Is there a discount you can provide on the actual cost of those services?”
So the reason I wanted to film this video is really just to talk about why there’s no such thing in business as a discount. And the idea of a discount is actually a fallacy that… Actually, a discount is more of a marketing gimmick because what people don’t understand is things have a value and the value is set. The values can be very subjective. So it can be subjective based on what the supplier believes that value is. And it can be subjective based on what the customer believes that value is. But when you’re dealing with someone and you ask them for a discount, then what they are thinking is, “Okay, I can give a discount, but what am I going to have to then take away to balance this equation out?” Because there’s no such thing as a deal without giving something back. And I think anyone that’s been through a Brexit discussion will understand this. To get something, you have to give something.
So what I wanted to talk about is some of the things that can really go wrong with asking for a discount and giving a discount. So ultimately, when you work with a supplier, it’s usually for one of two reasons. It’s something your business has to get done, and it’s completely essential. You don’t want to do it, but maybe the government’s making you do it. Maybe there’s some sort of legislation around it. So you’ve got to get that done. And then the other time where you have to get a supplier involved, is because you can see that they can actually add value to your business. So it could be that you’ve got a whole marketing strategy planned and you need someone to execute that marketing strategy, or create it in the first place. And when you get that right, that’s worth hundreds of thousands of pounds to your business.
So the challenge with that is, when you ask for a discount at the very beginning, you’re already putting yourself in a position that is then less favorable to the position that that supplier’s other full paying clients are in. So if you think about it, you might have a supplier who’s got 10 clients, and you’re the only one of those 10 clients who’s managed to negotiate the discount. So to that supplier, they already think you’re price sensitive. So what you’ve already done is you’ve demotivated them, because you’ve told them, actually in the future, you’re going to be asking for more discounts so their margins are going to get more and more eroded. So firstly, it is disheartening to that supplier and de-motivating to that supplier.
But the most important part of where asking for a discount is going to screw your business over, is because when that supplier ends up really, really busy, they might have the best will in the world that they’re going to deliver their service to a certain standard to everyone, all of their clients. But let’s say, they drop the ball on something, or they miscalculate something in terms of their capacity, and they then can’t deliver the service to the standard that they want to. Then they’re going to have to then prioritize which customers they work on. And if you’re the one customer in their whole customer portfolio who is on a discount, and then they think you’re going to ask further discounts, then you’re going to go to the back of the queue for everything.
So the reason that discount, and asking for that discount, isn’t good value is because that discount might only be worth 5% or 10%, which could be worth maybe a hundred pounds a month, depending on how much you’re paying this particular supplier. But what can happen is, if you end up being deprioritized, based on all their other clients, then what’ll happen is, when things really hit the fan and you need that supplier to step up, they’re not going to be there for you. Because they’re going to prioritize relationships they view as more lucrative.
And actually, another way to look at a customer supplier relationship, maybe it shouldn’t really be any different from how you look at the relationship with your staff. Because you wouldn’t go to your staff and say, “Okay, I need a discount on your salary this month, or for the next few months”, because it’s just going to demotivate them. They’re going to end up leaving and finding a job somewhere else. And people need to recognize suppliers can leave as well. So this is the reason, in my opinion, why actually asking for a discount is often really counterproductive. I’ve seen businesses almost collapse just because they tried to save a little bit of money on a particular supplier, or move suppliers just to save a little bit of money. And then that supplier completely fell through for them.
So if a supplier asks for a certain amount of money, you’ve got an option. It’s go with them because you trust them. And if you trust them to deliver the solution they promised, then you should also trust them to price in the way they need to, to deliver that solution. The pricing is based on the resources they’re allocating to your business. So you can’t expect them to deliver a solution with a lower level of resources because you’ve got that discount. So ultimately, you either trust that supplier and trust the amount of resources they’re going to allocate, or you walk away. But asking for a discount means you end up in this middle ground where you’ve got the promise of a solution, but you’re not giving the supplier enough resources to deliver that solution. And nine times out of 10, it’s a recipe for a disaster.
So I hope you found this video useful. Remember to like, share, and follow, and subscribe. And just a little bit about our Apex program. It’s, essentially, there to support business owners with decisions around pricing, decisions about which suppliers to work with. And it’s designed to get their business from where they are now, where they might have a couple of employees, to a point where the business is worth a million pounds. So if you want to talk to us about that and our solution for that, then get in touch. Book yourself in for a free strategy session and look forward to hearing from you. See you in the next video.