Discounting – The right and wrong ways to reduce your fees

There’s plenty of advice out there that confidently states: “Never discount.”

That we should always capture as much value as we can and protect our margins at all costs.

But I disagree.

Yes, careless discounting can damage profitability very quickly. But ‘never discount’ is too blunt for the commercial realities of running a creative agency or consultancy.

Like free pitching, discounting is a reality of our industry. I’d love to say it isn’t, but clients will always ask – and agencies and consultancies will often agree.

The important distinction isn’t between businesses that discount and those that don’t. It’s between discounting by reflex and discounting by design.

So, before we get into how you should discount, let’s start with when it might make sense.

When to consider discounting

1. To kick-start a relationship

I often refer to the three forms of value we receive for our work – the three Fs: Fun, Fame and Fortune.

Fortune, the most common, is obvious. We do the work for the money. We all have a living to make and bills to pay.

Sometimes, though, when a great new client comes along, it pays to play the long game. To think about the revenue they could bring over multiple projects, rather than only focusing on the first one.

Long, multi-year relationships have to start somewhere. But a client dangling the carrot of “potentially lots more work in future” isn’t enough.

A reduced fee makes more sense when it helps secure a clearly defined pilot, removes some risk from the client’s first engagement with you, or comes with a genuine commitment to further work.

Otherwise, you may simply be discounting for hope.

2. Because you’re quiet

I wish I had a pound for every time I’ve traced a wavy horizontal line in the air to describe the peaks and troughs of agency life.

I’m a pragmatist. When you find yourself in a quiet period, your need for work goes up – and the strength of your negotiating position goes down.

I think it’s natural, and perfectly prudent, to allow your fees to soften a little at those times. Especially when you employ permanent staff who you’re paying whether they’re busy or not.

Unused capacity has no value once it has passed. Like vacant hotel rooms.

A discounted project must still make a positive contribution, though.

3. For a great story

Fame is a little less obvious than Fortune.

You may accept a piece of work at a reduced fee because it’ll make a great marketing story, bringing value to your business beyond the figures on your invoice.

Perhaps you’ve identified a sector you’d like to work in but don’t yet have the credentials. Offering a discount might unlock that Catch-22 situation.

But will you be allowed to name the client, publish a case study or enter the work for awards?

If Fame forms part of the return, it’s vital to make sure you can actually claim it.

4. For a good cause

The third F, Fun, covers work we take on for other, often more altruistic reasons.

Perhaps your team needs some variety or greater creative freedom. Maybe the project will stretch them, boost morale or give somebody their first opportunity to lead.

Or you might take on a client because it’s a good cause and offer a meaningful discount rather than working completely pro bono.

Be honest with yourself about which of the three Fs makes the decision worthwhile.

How to discount

Rule 1 – Go in with your eyes open

Before the conversation, decide your ideal outcome, your acceptable outcome and the point at which you should walk away.

If you agree to a discount, clearly show the full, genuine price you would ordinarily charge, followed by the reduction and resulting fee. This helps guard against precedent and highlights the deal your client is receiving.

Rule 2 – Make it a one-off deal

Give any discount a clear reason and expiry point. Then put both in writing.

Otherwise, today’s exceptional price has an unfortunate habit of becoming tomorrow’s expected price.

Rule 3 – Quid pro quo

As with any negotiation, if you’re giving something away, try to secure something of value in return.

Don’t just concede. Trade.

For example, your discount might depend on improved payment terms, a larger up-front payment, flexibility over timing, a minimum volume of work or cancellation protection.

There’s also an important distinction here. If a client has a smaller budget and you agree to adjust the process, reduce options or remove deliverables, that isn’t really a discount. Then they’re simply buying less work for less money.

In these cases, change the scope and expectations explicitly.

But if it’s a true discount – supplying substantially the same value for a lower price – then make sure it buys you something worthwhile in return.

Watchouts

1. Understand the effect on profit

A small discount to the client can mean a much larger reduction in your profit.

Imagine a project priced at £100,000 with delivery costs of £70,000. It generates £30,000 in gross profit.

Give the client a 10% discount, while your costs remain unchanged, and your gross profit falls to £20,000. You haven’t reduced your profit by 10%. You’ve reduced it by a third.

Before agreeing to anything, understand your fully loaded delivery costs and the minimum contribution you need the project to make.

2. Remember the opportunity cost

When you’re quiet, you may think: “I’m paying my team, so they might as well generate some revenue.” Often, that’s true.

But discounted work can leave them with less time to help generate full-fee opportunities. 

Business development may not produce immediate revenue, but it should help end the quiet period.

3. Beware of ‘jam tomorrow’

Whatever you secure in return for a discount needs to be real.

Look for a concrete commitment, not a vague suggestion that you’ll be considered for future projects, that the client’s name will bring you exposure or that there could be a larger budget next year.

Future possibilities have some value. Future obligations have considerably more.

Discount with intent

Most pricing advice is concerned with how to charge more. In fact, I wrote about it myself recently in Price the client, not your work – when to charge more.

That’s understandable. Few things improve profitability as quickly as increasing your prices, and I’m a fierce believer in – and guardian of – agency profitability.

But protecting profitability doesn’t mean insisting on the highest possible fee for every project. Sometimes accepting less today can produce a greater return tomorrow.

So discount intentionally and strategically. Know which of the three Fs you’re pursuing. Understand the true cost. Decide what you need in return. And make the conditions explicit.

Then look back later and ask whether the trade paid off.

A good discount isn’t an apology for your original price. It’s an investment with a clear rationale and an expected return.

The important thing is to discuss and agree the terms of your discount with your clients in advance. If you or your team members find those conversations difficult, my Negotiating with clients training course can help.

What’s the best – or worst – reason you’ve had for discounting your fees?

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