Should I Give a “Friends and Family” Discount?

John Ray: [00:00:00] And hello again, I’m John Ray on the Price and Value Journey.

John Ray: [00:00:04] A few episodes ago, I spoke about ignoring the pricing advice of friends and family. Now, let’s come at friends and family another way. Should you offer a friends and family discount if you’re a professional services provider?

John Ray: [00:00:22] A few years ago, I was sitting with a solopreneur bookkeeper. We were talking about our business and our pricing strategy. And after some time, we took to review her pricing, her clients, and the associated work requirements of those clients. She stopped and sheepishly offered, “Well, there’s one more thing I should mention.” Oh, boy, I thought, here comes the real problem.

John Ray: [00:00:48] She went on to tell me she had several friends who needed help when they’d started their businesses, and she’d offered to do their bookkeeping at a heavily discounted rate. These arrangements were still in place after several years. I asked her, “Do you deliver your completed work for them at the same time you do for your other clients?” “Yes, more or less,” she replied. “And they’ve come to expect that because of the fine service you’ve given them, right?” “Yes,” she said. “And how are their businesses doing now?” I asked. “They’ve done well,” she said. “And, of course, they haven’t volunteered to pay your normal pricing now that they’ve got established businesses, have they?” Well, we both laughed because I already knew the answer to my question.

John Ray: [00:01:41] For professional services providers, here’s a major problem with friends and family discounts. They expect the same level of professional service that you give your clients who pay normal prices.

John Ray: [00:01:55] This bookkeeper had spoiled her friends by giving them a premium service offering, which now they’d come to expect as customary for the price they were paying. The fact that they were paying discounted rates had been forgotten.

John Ray: [00:02:12] Now, if you’re a videographer, let’s say, friends and family come to expect unlimited edits on their treasured video even though you’re giving them a big discount. If you’re an attorney, friends and family assume you’ll go to the ends of the Earth to help them with their case. If you’re a social media marketer, the expectation is for the same number of posts and level of engagement as all your other clients. And while you’re doing this work for your friends, air quotes, an existing client relationship that you have blows up because you haven’t given them the level of service they expect for the normal price they’re paying. Or, maybe a great new client comes along and you can’t take them on because you’re too busy. The latter scenario was the space this bookkeeper was occupying. She felt like she was at full capacity and couldn’t take on more clients when in fact her time was cluttered with these special arrangements, which were getting in the way of taking on great new clients.

John Ray: [00:03:21] This problem shows up with CPAs, accountants, and bookkeepers, too. I caught the disease one time myself. I had a non-profit that I had volunteered with and whose cause I strongly believed in, and they needed some accounting work done. The previous professional handling the work had volunteered their time and the work required wasn’t tedious. Well, I offered to do it at no charge because it was my contribution to a cause I believed in. The work was easy and it wouldn’t take a lot of my time. I thought that was an easy decision. Well, the problem it turned out later was that they wanted their work done at specific times, which conflicted with the work I was doing for full-paying clients. Stupidly, I didn’t go into the job thinking about this particular issue. And as we went on, they assumed I would deliver the work pretty much on demand. Well, after a few months, we mutually agreed that they needed to seek another arrangement.

John Ray: [00:04:26] So be very careful, professional services providers. These discounts and the associated work, they look innocuous at the beginning but the seeds of dysfunction in your business get planted, just waiting to grow.

John Ray: [00:04:44] I’m John Ray on the Price and Value Journey. If you’d like to check out our entire episode archive, go to pricevaluejourney.com or your favorite podcast app. And if you’d like to get in touch with me directly, you can email me, john@johnray.co. Thank you for joining me.