Reducing Fees: Does it ever make sense?

Reduce fees for proof of concept
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Whether value-based or dollars-for-hours-based, when it come to pricing, the immediate thought is often “How much can we charge for the program/product/service?” Presuming this comes from a place of acknowledgment of the work you do/value your business provides, not from a place of greed or “ick,” it’s good business.

There are also times, outside of a sale, when you may want to consider offering your program/product/service for a reduced price point. Here are three examples:

  • Proof of Concept: The first run of a program or product to see if it’s viable or just to introduce it to your community. We did this recently with our Uncheck the Box Program and noted that this first run is a beta and priced accordingly with the goal of getting feedback to further refine the program going forward.
  • Let Clients Test the Waters: We see it everywhere: a reduced price for the first month for a membership or subscription program in order to show new members how amazing the program is so 1/ they give it a chance and sign up and 2/ they stay in after the investment reverts to normal. Discover that new members aren’t staying past the reduced-price trial period? Ask them why so you can tweak the program/onboarding as necessary.
  • Supportive Partner: If your client is going through a tough time and you want to support them, you may choose to reduce your fee for X amount of time to show you value the relationship. Many companies did this in 2020 for industries such as restaurants, salons and gyms that were hit hard with closings.

If you do decide to reduce your fees for any reason, be sure to:

  • be very clear in the details: how long, how much, why, etc.
  • identify any requirements such as pay in advance, shortened invoice terms, feedback required, etc. For example, we offered a 2% discount for companies that pay via ACH as it saves us in credit card fees. This creates a win/win as we both benefit.
  • track to determine if it made sense in hindsight and whether or not to do again. Many companies that offered Groupon deals later discovered that customers didn’t want to pay full price. The customers assigned the “Groupon price” as the value for what they received. Many of the meal delivery kit companies discovered that offering several free meals up front resulted in a slew of new customers who then cancelled as soon as possible which negatively affected their overall numbers.

If you reduce your fees, ensure that your program, product or service remains profitable or, if a “loss leader,” that you’re tracking to ensure it’s generating the results you’re looking for.