Navigating Discounting: Dos and Don’ts

Hello and welcome to Mastermind Mastery, the podcast for professionals who want to create and run successful peer advisory councils, or as we call them, PACs for short, or they're also known as peer groups or business mastermind groups. I'm your host, Tina Corner Stolz, founder of Elix Council, where I've been in the industry running groups since 2005 and now help those like you with education, certification, and support wanting to do the same. At one time, I ran 10 groups, nearly 100 members, and sold my groups For a Good Multiple and recently released my second book, Your Seat at the Table: How to Create and Run Your Own Peer Advisory Councils, published by Forbes, and grateful to you that it's an Amazon bestseller. I invite you to join each week where we share strategies and techniques to successfully launch and become a master of running your PACs. You'll hear insights, perspectives, dos and don'ts, learn from my and my guests' mistakes, successes, and get the inside track to key takeaways. Each time we have guest, we'll be having a bit of fun.

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Let's get going and dive into today's episode.

Hello everyone. Welcome to the podcast Mastermind Mastery. I'm your host, Tina Corner Stolz, and today's topic is on discounting. To discount or not to discount. So I talked in an earlier episode about pricing, and I included some dos and don'ts about discounting your price in that episode. But it is not enough in order to get the full spectrum of the true pros and cons to discounting. So I decided to do a totally separate episode, which is today, on the dos and don'ts of discounting and what it really means to you and some tactics wrapped around that. So today, that's what we're going to do. It's a big topic. It's not one that's easy or a straightforward answer. And what you're gonna learn today is when to do it and when not to do it. That's the bottom line. So the first thing is, is what is discounting? And it's coming off your standard price for something less than what you would normally charge, obviously. Okay? So this applies to any type of discounting. It could be like if you're an executive coach, you might discount your coaching services, or a consultant, you might discount your, your advising services, whatever that might be. But the point is you're doing it for less than you normally would, or that you would like to, or what your regular pricing is. Okay, so we're gonna start with why do you discount? What even prompts the whole point behind discounting? And I'm first going to indicate it this way because I put it in the category of fear, and fear prompts discounting. Because there's fear that your deal won't close unless you lower the price. Okay. And fear, as we all know, is an acronym for false emotion appearing real, or sometimes it's called false evidence appearing real. The point is it's false, right? But it appears real and it feels real and it creates anxiety. It creates, you know, kind of an uneasy feeling and that you've— you're not in control. So therefore you have to do something. And in many cases, what you do is you discount a price thinking that will make the difference on somebody becoming a client versus not coming. So that's the reason why many times we lean toward discounting and close a sale, because it does feel real. But the reality point is, is it's not okay. So I can talk to this because my background is in sales. So I've been in sales all my life. And salespeople have a reputation, all right, and a tendency that they always want better pricing. They want lower pricing to beat the competition, to make a sale. But you are running a mastermind peer group business. You are your own boss. So you make the call, right? It's your revenue, it's your profit, and you must protect it. Okay, so the first rule of thumb is do not let discounting become standard practice. It's super easy that once you do it, that suddenly you feel like you kind of need to do it, or it becomes just a habit that you do it. And that is the worst position that you could get yourself in, because discounting should be an exception to the rule. Otherwise, if it's not, then you're, you're not pricing properly. So your regular price is really not your price, right? And the important point here is, is that the first rule of thumb with not discounting becoming a standard practice is because you must understand the financial and non-financial costs. So the financial costs, right, are kind of easy to calculate, and I'm not gonna go too much into that. I went into that a little bit in the pricing episode, and you all are smart people and you can calculate the financial impact that if you discount something by $100 a month, then you've lost out on $1,200 a year. And whatever your lifetime value of the client is, is then yearly times however many years there's a client, and that's how much you've lost to your bottom line. So you can easily calculate all that, right? But sometimes it's even more than that that you lose. It's not as simple as whatever you've discounted because it could impact your variable or your fixed costs. And I talked about this in the other episode, is that what it does impact is that you have only so many seats around the table, and when you discount a seat, it is now discounted permanently while that member is there. Unless— and I'll get to this in a moment— you raise their pricing.

Okay.

But how often does that really happen? Right. I will challenge you to that. So in essence, you've now— you can't add like another member. You only have so many seats available necessarily. So it's a lost opportunity is what happens. So pricing, as we know, is the most powerful financial lever you have in the mastermind business because you can either increase prices You can either sell more to bring in more revenue, or you decrease whatever your costs are. And there are not that many costs in this business. So that's kind of something that really isn't a very big lever to pull. So it's what you charge for your services and how many clients you have. That is your biggest lever. So an assumption, okay, that I just talked about was what the assumption is, is that a discount doesn't cost you money because they're taking a seat otherwise that's not occupied. So wouldn't it be better to put somebody in that seat versus nobody there at all and earn something versus nobody at all? So technically that's true, but isn't it better to have some revenue versus no revenue is what you're thinking? But that's wrong thought process. And why is that? Because I'm going to go now to the non-financial costs. The physical impact, the psychological impact. Actually, I guess there is a physical impact, possibly, right? But for the member, it shows that pricing is negotiable so that they can negotiate when they need to and think that, you know, you will because— and you set a precedent because you did. So they now have been conditioned that, well, your price isn't your price. So whatever it is to quote, they will then know they can come and ask for something less. So let's say they've asked you to lead a strategic meeting outside you moderating the peer group meeting, and you might quote them $10,000 to do that. They might say, well, oh, that's not my budget, you know, unfortunately, could you do it for $8,000? And that is because they know they can ask. Right? And that when they did ask, you actually accommodated. So it's hard to get those members back into the mindset that you did a one-off versus a regular thing, right? So that's not okay, a good long-term plan, right? That is actually long-term pain because that is what has happened now. They'll be almost forever at your lower price point because it's super hard to get them off of that. So anytime someone asks for a discount, I always would say, I appreciate you asking. You know what? I would too. Never hurts to ask. Well, one thing you'll find out about me is that I give the very best pricing for the very best experience. So I already gave you that discount in essence. And that will— I have never, let's put it that way, had anybody like argue that at all. So I have set a precedent that from a standpoint of my integrity and ethics, I'm giving to you as straight as it is. All right. And I want it to be consistent with everybody else around the table. The thing to keep in mind is, is that if they push it, you must figure out why. Okay. And I'm going to, you know, come to that back to this in a second, because the point is, is for every percentage you give, it removes it off your bottom line. And so you have to be really certain that it's worth giving. Okay. So you have to assume first is that the reason for discounting is valid. Now, when I say the first is you have to assume, it's really not that I want you to assume. It's that a lot of times you immediately jump to, well, there must be a valid reason why they're asking for a discount. I must give it. Like, maybe they can't afford it, or, you know, they don't see the value, but they see the value if it's for a lesser price. But the point is you have to ask and validate why it is they're asking. And I would simply just ask, why are you asking? Because it would be amazing, and it is amazing for you to hear what their response is. Okay. I told a story previously about my dad and somebody wanting to discount off the price of his concrete mixer. And when they asked for a lower price, his reply back was a higher price than what he had quoted. And that was to take that individual off guard and to make a point in that he gave them their best price that he had to start with. And then immediately they acquiesced and they bought it at his stated price. Now, that's an example of the request being not valid. Now, when's an example of a request being valid? I will use this story in that one time I was speaking to a potential member And it was a nonprofit. And nonprofits truly have some challenges that for-profit organizations do not have, which is they have a board they have to answer to. And a lot of times the money that they've raised is specifically designated to certain, you know, activities and criteria or strategies that the nonprofit has. So a lot of times discretionary, what might be considered being in a peer group discretionary. Price, um, cost is not a possibility. So in this case, this individual was not only very, very networked in the community— this is a brand new group that was to be, um, put together— and her experiences, her background, and her connections would make a big difference in everybody else joining the group because she was well known and respected for her leadership. So as a result, I gave a discount. But for that discount, okay, there were criteria I asked for in return, and referrals were a big one. So it helped get the group off the ground. It helped get the group off the ground what I considered months before it normally would have. And if I took that, those couple of months that I knew that group started sooner than later, I made up by far and exceeded the discount that I gave her. So some of those reasons can be is that you're looking to get a member that will anchor the group. The key thing is, is you always do it in exchange for other things that equal the discount in your minds. Whether it's a hard ROI or not, but it's perceived equal value. So referrals, it could be meeting space, it could be other connections, it could be, um, speaking, whatever it might be, but you always exchange it for something else. Otherwise, you just gave it away. And when you just give something away, it's even now devalued more than the actual cost. Because it wasn't in exchange for anything. It will also cause your potential member that you are discounting to have greater respect for you because you didn't just give it up, that they too had to earn that discount. And if there's one thing you take away from this podcast is for— if you discount, they must earn it. All right. There must be something in the return that they commit to to earn that discount. Now, there are all kinds of tactics that you can use to offset, okay, pricing. Because if someone asks for a lower price and I do that question, hmm, why are you asking? Out of curiosity, to gain clarity so I can understand if this is the true objection or not, which most of the time it isn't, as we know. But I'm seeking the real reason. But if a discount needs to come about, let's say temporarily, because they're waiting for a contract to come in and the cash flow is just slightly off because they're in rapid growth mode, so I might lower the first 3 months of their membership and increase the latter part of the months of the membership to make it up in the end, net-net the same, but it's just rearranging the money for cash flow reasons to help them. Okay, so the point back is when you give, there needs to be reciprocal back. So the takeaways from today's episode that I want you to really have heard is don't discount unless, one, you get a trade, and two, it will benefit you more to do so by giving that discount. Otherwise, it will not be worth it, and you will have all those financial and non-financial costs that will come about. But more importantly is don't devalue what you're offering. The concept of the mastermind and peer group, right, space, is there's tremendous value. And just be sure they understand that and they know that what you're asking for in return for that value is they'll receive probably way more than what they're paying you. So I hope today is helpful for you. If anything, reminding at the moment you have that feeling to discount, that you second-guess and do an internal check about whether that's the right thing to do or not, and that you then deserve to make what it is you're worth making while you're doing these peer groups and mastermind groups. Okay, thanks again for everyone for joining me today on Mastermind Mastery, and I look forward to connecting with you next Tuesday another awesome topic. And until then, go make it happen.

Hey, moderators of groups, thank you so much for listening to today's podcast. To get access to today's show notes and exclusive content and resources, visit TinaCornerStolz.com/podcast or LXcouncil.com, where you can also become part of an exclusive online community community, attend our Academy, or get free resources, templates, checklists, and more. And you can even contact me there as well. So if this episode resonated with you and you know someone who can also benefit from listening, please share with them by taking a screenshot and even posting on your social media. I also love reviews and appreciate hearing from each of you, those actually doing this wonderful work. Please tune in next week for another episode of Mastermind Mastery. And I'll close by sharing something my mentor did after every learning moment. He shared a shiny pebble from his pocket with anyone he passed knowledge to and asked them to forward that pebble—knowledge—on. So now I encourage you to go pass on a pebble, the takeaways you learned today. To either your existing groups or fellow peers.

Now, go make it a great one.