Discounting strategies for consultancies

Say you are a consulting business turning over more than £1m and regularly discounting your fees. If you are making £200,000 profit and giving away, on average, a 10% discount, do you realise that you would increase your profit by 50% if you stopped discounting?

That’s right, 50% profit improvement without winning a single extra client, hiring another consultant or adding another delivery headache.

That’s why discounting deserves more attention than it often gets.

I’m not saying you should never discount (although there is a strong case for it). There may be occasions where it’s the strategically right thing to do. But if you’re not currently discounting, stay there. It’s a good place to be.

1. Give to get

If you are discounting regularly, the first principle is simple. If a client wants a better price, ask for something in return. That could be better payment terms, a longer commitment, a bigger scope, a case study or a video testimonial you can use in future marketing.

2. Standardise your discounts

Don’t let every negotiation become a one-off decision. Create clear volume thresholds, make them transparent and apply them consistently. If two clients are buying a similar service, they shouldn’t end up paying different prices simply because one negotiated harder.

3. Use micro-discounts

Too many consultancies jump straight to 5%, 10% or even 20%. Start smaller. A 2.5% discount may be enough to move the conversation forward, and it gives you room to negotiate without giving away more than you need to. Your are more likely to end up at 5% than 10%.

4. Approval

Your team may need some commercial flexibility, but beyond a certain point, they should have to seek approval. That simple step makes people think harder about why they’re discounting, rather than using price as the easiest lever to pull.

5. Mindset

The biggest cahllenge is often belief. If your team doesn’t believe your rates are justified, they’ll discount before the client even properly pushes. That becomes especially risky as your fees rise. You need to keep reinforcing the value you create, the outcomes you deliver and why your pricing is fair.

6. Target gross margin

If senior people are rewarded only for sales, discounting can feel painless. If they’re accountable for gross margin, they feel the impact of giving money away.

7. Benchmark

I still see excellent boutique consultancies delivering huge value while charging significantly less than larger firms. Often, they don’t need to. Every year we benchmark consultancy day rates in consultancy BenchPress survey:

8. Value

The best way to avoid discounting is to move the conversation away from cost and onto value. If the client is focused on the commercial outcome, the risk you’re reducing or the opportunity you’re helping them capture, you’re much less likely to end up haggling over day rates.