Discounting with Dignity

If we have to consider the dreaded discount, our philosophy should be to "Discount With Dignity."

So if we have to consider the dreaded discount, our philosophy should be to "Discount With Dignity." Now what does that mean? It means that if we must discount prices to survive, we must also do it in a way that allows us to eventually thrive. It means we don't take value or differentiation out of the process. In fact, we stress these concepts more so that our future clients will appreciate our flexibility even more. The difference is we will be more willing to beat the competition, meet our client's financial needs but on our own, well-thought out and calculated terms.

Here are some things you should think about when negotiating in this kind of climate:

Know the competition's strengths and weaknesses, and how they present their value proposition or differentiation. Also, know their current occupancy level, "published" pricing and their discounting/negotiating behavior. You need to know the enemy (or the enemy will turn out to be you, as you lose deals you could have gotten or doom yourself to profitability paralysis by accepting deals that will not serve you in the long run).

Know your prospect. Now more than ever, you need to establish a relationship with your potential client. Do you know things like "perceived" budgets (we all know a budget isn't always a real number but we have to be in the ballpark)? Do you know what clients and prospects expect of your business center, why they are choosing a business center, what's most important to them, and who the decision maker is? The more you know of the "how," "when," and "where," the more likely you are to offer a "valued" concession. There's nothing worse in a tough economy than to give away things you don't have to give away or that are not important to the client.  

Look at how you present your price to a future client the very first time and resist all temptation to do it over the phone. Do they get sticker shock (and never come back) or do they see options and flexibility in your offering. Your written presentation must suggest flexibility if you are going to get to the next level with today's client.  The Academy is here to provide you with other flexible strategies you can implement to show your client that you are willing to partner with them while times are tough.

Consider discounting upfront charges first rather than monthly costs. Sometimes the huge "move in" number is the obstacle and by reducing upfront charges you are making it financially more palatable for your client to move in. Even corporate clients want to hold onto cash as much as possible right now. The Academy suggests that all the concessions have a "give and take" philosophy. Make your discounting philosophy a "you get this if I get that" negotiation. Don't give anything away for free or without getting something in return. The Academy's detailed training program on sales negotiation tips has many suggestions on how to do this.

Implement a "Diminishing Discount" policy. Whether you are an owner implementing a policy to your management team or you are a single center owner who sets and delivers negotiating policies, be sure that you know when to stop. At the Academy we have found that when you hit a down economy, it is time to immediately implement guerilla negotiation policies with built-in limits. Our research shows that one of the best strategies you can use is one based on occupancy. We can help you create tools to put a plan like this in action. Again, offering flexibility based on the client's needs in tough economic times is seen as partnering, not selling.

Always make sure clients know and feel like they are getting the deal of a lifetime. Everyone wants to feel like they got something special and if they are accountable to selling the proposal to a higher authority, they want to be able to look like the negotiating hero.

Nothing is forever. Make sure that the policies you establish during difficult times are not something you are stuck with forever. Make sure your contract reads and that your client understands that these concessions are for the initial term only. For those of you with automatic renewal clauses in your agreements, make sure that at the end of the initial term there is language that ensures that the monthly fixed cost for the office on the next term goes to the then-established "market price."

Increase your published prices regularly (the Academy suggests a small incremental price increase quarterly) as the economy turns around. Let's face it, your rent and CAM charges are going to continue to go up. Don't put yourself in a position where in a year or two you won't be able to cover your costs because you failed to increase your prices. Get past your fears and prepare for the future. There are other benefits of a price increase policy for your managers and your current clients that we would love to share with you in our negotiation seminars.

Don't fall for negotiating tricks and always give things up slowly and in small increments. The trick savvy negotiators love to use is "I wanted to pay this, you are here, let's split the difference." Or, they ask us to match our competitors pricing. Negotiate based on your own terms, your strengths and your knowledge. If the competitor's price was so good, why are they still talking to you? You must have something they want. There are so many ways the Academy can teach you on how to deal with negotiating tricks and learn to use some tricks of your own. It is well known in the world of negotiations that your first position is never perceived as your last, but as a starting point. In this economy, everyone is looking for a deal. So if you give it all away upfront, you're doomed. But expect to give something away.

As a last resort, analyze your current published pricing. Do you need to make temporary adjustments to your published pricing to get more in line with the economy and your market conditions? Don't – and we stress don't – do this randomly if you are going to do this at all. Your fixed costs should always dictate your published and target pricing to ensure long term profitability. This is not a preferred or permanent solution and must certainly be adjusted as soon as you see signs of the economy improving or your center's position improving.

We are here to help you implement a "sales survival" program like this where the Academy will help owners and managers to understand the motivation and principles behind such a program completely and how to train managers, oversee the process, set limits and know when to change strategies as your center position or the economy improves. Having an "economic recovery strategy" and a "discounting with dignity" program is smart business!

Annette Reizburg is the Director of Operations for The ALLIANCE Academy. Look for an announcement to join her for a more detailed and timely Webinar on this topic. She is also available to work with you and your team individually through a training seminar. Contact The ALLIANCE Academy for more information at 561-400-6112.