Discounts Can Build Trust with Your Team and Your Customers

by

Jessica Massey
Marketing & Sales Operations Analyst
May 10, 2018
/
minutes to read

Get to the Point:

  1. Empower Your Techs - Your technicians and the customer are the only two people to have all the information on a specific sale. Trust your technicians to give out discounts when they feel fit.
  2. Set the Budget - Define the expectations with discounts given by setting up a discretionary fund, and guidelines on when to give discounts.
  3. Review the Discounts - Figure out with your team which discounts helped close a deal or make a dedicated customer, and which didn’t work as well. Set guidelines on how to make each discount help the company.

Build trust through discounts

Have you ever worked in a place where you had zero flexibility to bend rules to help a customer? I bet you did. Now that you’ve got your own contracting business, you’re free to give discounts to customers at your own discretion. Discounts make a big, fast impression. But do you let your employees give discounts? If that question makes you itch then your staff are probably as frustrated as you were at your old job.

Why did you become your own boss?

Owners often tell me that they started their own business because they could do it better than their old employer. For you, ‘it’ may be more about how you’d like to treat the customer than the quality of your work. You know the trade-offs that come with giving discounts: less profit on this job, better customer loyalty, an invitation to abuse, price strategy messes, lighting a fire under a customer… and so on. Even if you open your books to your staff, do they really show that they ‘get it?’ You could set rules: you must approve all discounts or all discounts come from this pre-baked list. But this may just be wallpapering over a bigger problem.

How does your employee see your discount rule?

Let’s say your customer service rep is in a tough conversation with a customer. You put in a new storm sewer line and replaced a sidewalk square. That all works fine. The homeowner has a lot of landscaping to restore — more than they expected. Your crew did everything you promised, and the customer feels the crew could have been much neater. If this is a good customer (someone who’s given you a couple years of jobs that led to more jobs with their relatives), you don’t want to lose them. This is really about your reputation. But it’s not you taking the call, it’s your customer service rep. Do they feel they have any freedom to show the homeowner you value them? Or, are they getting short with the customer by thinking,

“Every time this happens it grinds glass in my stomach. My hands are tied, the owner already laid down the rules, I can see a chunk of business leaving, and no one trusts me. Bottom line, I just want to get it over with.”

Ugh, that’s not what you intended with your discount rules.

Try a Different Approach

Give your employees permission to offer discretionary discounts. “Wait, they’ll give away too much trying to make everyone happy! It’s a race to the bottom. We already give fair prices. No one will value our quality.” Really, what’s the underlying problem? If your team already shares your values, then do they know how the discounts impact your plans for the business? If not, that’s an easy one. Set aside a block of money up-front that your team knows they can use to solve problems for the customer. On your budget, this comes out of realization. You’re no longer counting on it for reinvesting the profits, and your team feels confident they can fix far more problems than before.

Who else gives discretionary discounts?

Home Depot allows its sales and floor associates give $50 on-the-spot discounts to customers. At an extreme, Ritz-Carlton employees can spend up to $2,000 to solve guests’ problems. Both of these happen without supervisor approval, and without hurting staff incentives. They both justify it by looking at the lifetime value of a customer and comparing it to the cost to acquire a new customer to replace a lost one. Both firms decided their policy is a bargain. Would you?

Not every discount has to appear on the invoice.

Your tech might decide to take the money and cover a check-in visit a week later to see if a leak was really stopped. Your office manager might give a free can of lube to a homeowner who just needed a squeak prevented, not a whole visit. You get the idea. More importantly, now your employees are thinking critically about how they can best help the customer and your business with the funds you’ve trusted to their care. When you ask for their ideas on how to improve, they’ll share some creativity. This is almost like a staff reward — those who apply it well might get a bigger budget.

In your office, you’ll do a happy dance when you don’t dish out the whole budget. Just don’t tell anyone — this only works when your staff knows they’re free to use it without penalty. In fact, don’t publish your policy on your price lists to customers either. That turns into an expectation not a ‘thank you.'

How can this go wrong?

  • Some customers become ‘favorites’ for no business reason, getting way too many discounts.
  • The discount still loses the customer.
  • The customer thinks a discount is too little too late or starts to expect it every time.
  • The budget covers bad behavior.

You could overcome all of these by meeting weekly to evaluate discretionary discounts with your team. Your work order and invoicing software should track discounts like Pointman does. What worked? What didn’t? Why? How can we prevent this from happening to another customer? Luckily, you’re probably too small for sloppy service to go unnoticed for long if you check for it periodically.

Always a Silver Lining

Don’t forget that there’s a big upside to turning around a bad situation: your customer may share the story! At Home Depot, other customers may overhear the discount. At Ritz-Carlton, the guest might write a great review. If your customer thanks you, you could humbly ask they write a nice review too.

Look at Pricing

The start of the year is a great time to look at pricing. Usually, you have an idea of how your company fared the year prior, and you want to ensure you will continue to grow in the months to come. Many of us make New Year’s resolutions with respect to spending or saving in our personal lives, and it’s no different for business owners. Making sure your pricing is in line with where it should be is one of the strongest ways to start the year the right way.

Part of looking at your price book is finding where the issues are, and that can take time. An HVAC company in January is going to be very busy, so it’s a difficult time for a close look. However, a plumbing company might not be as busy. Whenever you tackle this job, your best bet is to look at what your labor rates are. Start there, and let it trickle down across the board. Ask yourself, “Are my labor rates helping my business stay profitable?”

Remember, there are many different services out there and many different groups or communities that you can engage. Never hesitate to say, “Hey, I’m a business owner in Florida. What should my labor rates be?” You can build your price from there. There are also some great billable hour calculators available.

Set Goals

There is no better time of year for looking inward than January. Set your personal goals and company goals for the following 12 months. If you can break those down into departmental goals, even better! Perhaps that means a CSR booking closing rates a little better, or a truck doing 250,000 a year rather than 200,000.

Many companies have found that using an Objectives and Key Results (OKRs) goal-setting system pays off. Looking for a guidebook when it comes to OKRs? Check out Measure What Matters: How Google, Bono, and the Gates Foundation Rock the World with OKRs by John Doerr. 

One key question is the best way to handle setting goals: Is it smarter for business owners to handle this solo, together with staff, or to delegate completely? 

The best approach is to set goals at the department level. As an owner, you need to take the time to understand what the goals are in each department, and make sure they are in line with your goals for the company. No one likes to set unattainable goals for themselves, so make sure you push your departments to set goals that are lofty, rather than simple ones to feel good about hitting. Entrust your staff to aim higher, and watch how they respond.

Pass Along these Points

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