How to say no to discounts
A template for saying no to anyone who asks you for a discount.
Hi, it’s Melissa, and welcome (back) to “your founder next door”, a weekly publication with stories and tidbits of my human journey bootstrapping eWebinar to $5m ARR. No BS, just straight-up truth bombs on what it’s like to build a company without an abundance of resources or friends in high places.
PS. This article assumes you have a well-priced product or service where the ROI of investing in it is justified. Below is a template you can use to respond to anyone who asks you for a discount.
One of my managers told me something right out of university that stuck with me: “You pay peanuts, you get monkeys.” I was working in a real estate showroom at the time, and he pointed out that the people who paid the least were the squeakiest wheel. They gave you the hardest time and demanded the most attention.
I’ve since built three companies, and that observation has held true in every one.
We don’t give discounts at eWebinar. We don’t extend trial periods. We don’t offer free accounts no matter who’s asking. I’m going to tell you why you shouldn’t either, and give you a template to respond to anyone who does.
When we first launched, we had a 30-day trial and a low conversion rate from trial to paid. People were signing up then never creating their first webinar, which is how they get to experience first value. We had a hunch that 30 days was just long enough for them to forget about us, so we lowered it to 14 days. Conversion went up 20% and it didn’t impact sign-ups.
We also started at $49/month for our first plan. At that price, people would sign up because it didn’t matter if they lost $49. They’d churn in a month and ask for a refund because they “forgot they signed up.” The most price-conscious customers were the loudest ones in support, the least tech savvy, and the least mature in their own businesses. We were doing all of our own support in the beginning so every complaint was felt. It was demoralizing. We doubled prices and revenue went up immediately even though conversion dipped slightly. More importantly, the toughest, most demanding customers who needed the most support instantly disappeared.
Many founders will tell you the same thing: charging more puts them into a different category and cuts out the tire kickers. I’ve also learned this firsthand.
Over time, we noticed that the users who never activated on our platform, no matter how hard we tried, fell into these categories:
People who signed up because of a discount or extended trial (eg. Black Friday)
Partners, affiliates, and influencers who got free accounts in exchange for marketing
Well-known companies we did all the setup for in hopes of accelerating their onboarding
We gave a free account to an influencer with 500,000 followers who said they were going to use eWebinar to sell their course. We never heard from them again. Every time we reached out, it was “I’ve been too busy, I’m definitely going to do it.” They never did. It hurt us more than if we’d never engaged them at all, because by removing their urgency, they never saw the value of our product and never used it in their business. We even tried building entire webinars for people, writing all their content, setting everything up so all they had to do was promote it. They still didn’t log in.
It’s tempting to give someone with a big audience a free account, especially when they promise you the world. The problem is, when people don’t pay for something, they don’t value it enough to invest time into learning it. When there’s no investment and no deadline, there’s no urgency. When there’s no urgency, there’s no action.
So we stopped giving anything away. No more discounts, extended trials, and free accounts. We focus on serving customers who are motivated to invest in our solution because they’re excited about it. If someone can’t justify the ROI, we let them go.
Every week, we have customers who don’t convert or churn because they found something cheaper. Prospects who ask for discounts before they even sign up.
We didn’t start this company to be the cheapest. We started this company to be the best.
People will always ask for discounts. If you don’t ask, you don’t get. That’s just human nature. Someone asking doesn’t mean you need to give one.
Most of the time, they’re not saying you’re not worth it. They’re saying they don’t want to pay what you’re charging. They ask because you’re a startup and they think you’ll budge because you’re small. Nobody goes to Stripe and asks for a discount before signing up. Stripe wouldn’t even respond.
Here are some of the most common things I hear when people ask for a discount:
We’re a startup and very cost conscious. So are we. Our product is an investment, not a cost. The moment someone sees you as a cost without a return, they will churn anyway.
We’re a non-profit. Non-profits are still businesses, and many are better funded than us. We’re barely profitable ourselves.
Your competitor is cheaper, but I like you more. You liking us more is exactly why you should pay us more. We didn’t start this company to compete on price. That’s a quick race to the bottom, the only race we don’t want to win.
We need more time to evaluate. You don’t need to fully launch a product to know if it can deliver value. B2B solutions commonly take weeks or months to set up, and a company must start charging the moment customers start digging into it. Mailchimp is going to charge you for all the time it takes for you to setup your campaign. Calendly is going to charge you whether or not someone books a call.
We need to run a marketing campaign first to see if the webinar converts sales. So you’ll spend thousands of dollars buying leads, but not $99 for me to deliver your pitch to those leads and sell for you? How is that logical?
Notice how none of these reasons have anything to do with us?
You cannot price according to someone’s ability to pay. Your value doesn’t decrease based on someone’s inability to see your worth. If you don’t value yourself, no one else will.
The most powerful thing in any negotiation is the ability to walk away. If someone can’t justify the ROI of what you offer, be willing to let them go. That conviction will serve your business and your mental state far more than any discount ever could.
Here’s a template I use to respond to people who ask for a discount. Feel free to edit it for your own business:
Thanks for your message and for considering [your company]. As a bootstrapped startup, I understand where you’re coming from when you want to optimize costs.
Here’s the thing. If price is your only consideration when choosing [your product category], we are not the cheapest. Nor do we strive to be, because we wouldn’t be able to deliver the quality of product and service that we offer otherwise.
When I started this company, I set out to create the best solution on the market, and deliver the highest ROI [or name the ROI like conversion rate], which I believe we have achieved after [X] years.
Our prices [trial periods] are fixed. Just to share with you, our [biggest cost] alone is around [$X or % of subscription]. So as you can see, there’s not a lot of margin built in. I wish that were different, but high quality output requires high input. I’m sure you can understand that too. The only way we can continue to deliver this level of product and service is to keep generating revenue to support our team.
I would recommend that you compare us with another solution in terms of [your key differentiator] before making a decision [if they mention your competitor]. Hopefully, you’ll find that your [results] make up for the difference in investment.
If not, it’s just good business to go with something that gives you a higher ROI. It would suck to [We’d hate to] lose you as a customer, but I understand. And if that happens, we do hope to win back your business some day soon.
By the way, on ProfitLed S2E17, You Pay Peanuts, You Get Monkeys, I discussed this topic in detail with our COO, Todd Parmley. Give it a listen.
Till next time,
— Melissa, your founder next door ✌️
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