Hi there, I'm Greg Merrilees from Studio1 Design, and I'm excited to dive into today's topic on the Real Magic podcast with my co-host Alan. As a design business owner, the issue of pricing and discounts is something I've grappled with many times, and I'm sure it's a challenge that resonates with a lot of our listeners.

Just recently, I had a new prospect reach out to me asking for a discount on one of our mid-range design packages. This was someone who had never worked with us before, and their reasoning was that they might have more projects for us in the future. Now, I know the temptation to offer a discount, especially when a potential client dangles the carrot of more work down the line. But in my experience, that's rarely a reliable promise.

Instead of immediately caving to the discount request, I explained that we don't typically offer discounts, especially to new clients. I pointed out that it wouldn't be fair to our loyal, long-term customers who we do provide discounts to. Our pricing is carefully considered to reflect the value we deliver, and I don't want to undermine that by discounting for someone who hasn't yet experienced our work.

Throughout our discussion today, Alan and I will explore some of the pitfalls of discounting, as well as more effective pricing strategies that don't involve lowering your rates. We'll talk about the importance of perceived value, how to build a value stack for your offerings, and ways to differentiate your business beyond just price.

Ultimately, I believe that confidently standing by your prices, and only offering discounts to your most valuable, repeat customers, is the best path to sustainable growth. I'm excited to unpack this topic further and hopefully provide some actionable insights that you can apply to your own business. So let's dive in!

• Why understanding customer desires for discounts can lead to offering valuable alternatives without always compromising on price
• Pricing strategies for premium products/services, including the importance of perceived value and building a value stack
• Expert tips for pricing, including offering value stacks and masking higher prices through additional items.
• Expert tips on pricing, discounting's impact on value, and the importance of brand integrity and social proof for success
• How loyalty programs, targeted discounts for repeat customers, and testing pricing can boost retention and lifetime value

Discounts: When to Offer Them and When to Stand Firm on Your Pricing

As design business owners, one of the trickier aspects we have to navigate is pricing - specifically, whether or not to offer discounts. It's a delicate balance between providing value to clients and maintaining the perceived worth of our services.

Recently, I found myself in a situation that I'm sure many of you can relate to. I had a new prospect reach out, someone I had never worked with before, and they immediately asked for a discount on one of our mid-range design packages. Their reasoning? They claimed to have more projects lined up for the future that they could send our way.

Now, I know the temptation to offer a discount in a scenario like this. After all, the prospect of ongoing work is enticing, and we all want to land new clients. But in my experience, those kinds of promises don't always pan out. And more importantly, discounting for a new client goes against my core philosophy on pricing.

In this episode of the Real Magic podcast, my co-host Alan and I dive deep into the topic of discounts - when it makes sense to offer them, and when you're better off standing firm on your pricing. Here are some of the key insights we uncovered:

The Importance of Perceived Value

‍One of the main reasons I'm hesitant to discount, especially for new clients, is that it can undermine the perceived value of what we offer. Think about premium brands like Ferrari or Rolex - you never see them running end-of-year sales or offering across-the-board discounts. That's because they know their products are inherently valuable, and discounting would only serve to cheapen that perception.

The same principle applies to design services. If a client sees that we're willing to discount for them, it sends the message that our regular prices aren't truly reflective of the value we provide. And that can make it harder to justify our rates in the future, even with loyal, long-term customers.

Building a Value Stack

‍Rather than defaulting to discounts, a more effective pricing strategy is to focus on building a "value stack" for your offerings. This means carefully crafting your products and services to deliver maximum value to the client, before you even get to the pricing stage.

For example, let's say you're selling a website design package. Instead of just quoting a flat rate, you could present the client with a tiered set of options. The base package might include the essentials, while higher tiers add on additional features and functionality. The key is that each tier is priced to reflect the true value it provides, rather than just offering a straight discount.

This approach accomplishes a few things. First, it gives the client a sense of the full scope of what you can deliver, which can make your regular prices feel more justified. Second, it allows you to upsell clients to higher-value packages without resorting to discounts. And third, it gives you more flexibility to experiment with your pricing and see what resonates best with the market.

Differentiation Beyond Price

‍Another important consideration is how you position your business in relation to your competitors. If you're constantly trying to undercut others on price, you're essentially in a race to the bottom - and that's a battle you're unlikely to win.

Instead, focus on differentiating your offerings through quality, service, and perceived value. This could mean positioning yourself as the premium provider in your niche, or finding creative ways to bundle your services into high-value packages. The goal is to give clients a compelling reason to choose you that goes beyond just the bottom-line price tag.

One great example Alan shared was a design business that charges $30,000 for a two-day workshop. That might sound like a lot, but they've positioned themselves as the authority in their space, and they deliver an exceptional level of value and transformation for their clients. By contrast, they're not the cheapest option out there - but they don't have to be, because they've built such a strong brand reputation.

Loyalty-Based Discounts

‍Of course, there are times when offering discounts can make sense - but the key is to reserve those for your most loyal, repeat customers. After all, it's typically much easier and more cost-effective to retain an existing client than to acquire a new one.

One approach Alan and I discussed is the idea of "grandfathering" in loyal clients at their original pricing, even as you raise rates for new customers. You could also offer tiered pricing structures that reward clients for longer-term commitments or higher-volume work.