NFIB

What To Say When a Client Asks You To Lower Your Rates
05/ 09/ 2002

With an uncertain and even volatile economy surrounding all small-business transactions today, it's quite likely that you will receive requests from customers to lower your charges for products or services. Lowering rates on request may help retain a customer, but you can't count on it. There are usually many factors in addition to price that help create loyalty among your customer base. In today's Workshop, Jeffrey Moses discusses issues involved in lowering rates and offers suggestions for what to say when you decide to hold firm.

It's almost impossible for any small business to set a blanket policy about whether or not to lower rates when requested. In some cases, your business may benefit by acquiescing to customer requests. In others, you may think it best to decline. Either way, your decision should be based on careful consideration of the strength and length of relationship with your customer, potential longevity of this relationship, whether the current rate is higher or lower than your rates for other customers and whether your rates are high or low within the industry.

When one of your best long-term customers asks you to lower your charges, you should ask why the request is being made. If the customer is having trouble with cash flow or says that business is temporarily slow, you may want to consider offering a temporary reduction in your charges. This shows your goodwill and underscores how much you value the relationship you have formed. In ways, a relationship is like a partnership--when a good customer thrives, you thrive. Pitching in during difficult times will be remembered. But be sure to establish that the reduction is not permanent and that normal pricing will be re-established in the future.

If you're currently working on low margins, it may not be feasible for you to lower your rates even for your best customers. What to say in this case? As always, tell the truth. Say that you value their business and don't want to lose it. Then remind them that your rates are highly competitive as they are, and if they were lowered, you would not be able to supply products or services of the same high quality your customers have come to expect.

You may lose a customer when you decline their request. But if they stop doing business with you even after you have stated your case clearly and honestly, it may have been that the customer would have been thinking of finding a new supplier anyway--or that they were having such financial difficulties that they were in the process of cutting back on all outside contractors.

Customer value comes not only from competitive prices. Based on this, you might offer added benefits in place of reduced rates. For instance, when asked to reduce your rates, you might respond, "It's not possible to reduce my rates because they're already very competitive for the level of quality I supply. However, I can offer you turnaround over the weekend (or overnight) whenever you really need it--with no charge for off-hour work by my staff." Extras like these often mean even more to a customer than lowered rates and could go a long way in helping to cement a good business relationship.

When it's apparent that customers in your industry are all having financial problems, you might consider calling them and offering to reduce your rates temporarily. This can be a boon to a relationship, but it must be handled properly. Don't make it sound as though you've made the offer because your company is having trouble. Make it clear that you understand the difficulties they are temporarily experiencing and because you value them as a long-term customer, you would like to help them by offering a slight, temporary rate reduction until the industry's overall situation improves. This unusual tactic can prove highly effective, and can help maintain your cash flow through uncertain periods. But as with any decision to change your rates, your offer should be made only after careful consideration of all factors involved.

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