The Dangers of Discounts in HVAC/R Businesses

If you own an HVAC or refrigeration business, there may be times when you think giving a discount might be the right thing to do.

Maybe you have a friend who’s having a hard time and suddenly has an evaporator coil leak that needs attention. You may consider offering him a discount to help him out.

Perhaps you regularly do a lot of residential HVAC jobs for a vacation home property manager. She saves you a lot of money in advertising costs and has been a good customer for several years.

Or maybe you run a grocery refrigeration business and happen to meet someone who oversees the operations of a supermarket chain in your service area. The conversation goes well, and it’s clear that you and this person could do business together. As the conversation finishes, he says, “If you’re good to me, you may stand to get a lot of business.”

You might consider giving any one of those people a discount because of their circumstances. However, I wouldn’t personally give a discount without some serious thought. Maybe I just tend to be on the more cautious and cynical side, but I try to think about a few things before I give anyone a discount.

 

Motives

I start by thinking about the reasons why I’m in business. I’m in business to serve customers and enjoy my work, but I also have to make a profit to support my family.

Potential customers also have those same motives. If a customer you hardly know asks for a discount in exchange for more work or a testimonial, there’s no guarantee you’ll actually get a return for the money you’ve sacrificed. 

Why is it good practice for them to ask you to charge less than usual just because they could do a good thing for you later? Let’s look at it another way:

Would it be different for you to ask them to pay more than usual because you’re such a good person and might do them a favor later?

When we look at business, we want our exchanges to be of fair and quantifiable value. It just doesn’t make sense to exchange a good or service for an unequal value under the impression that the difference might pay for itself later. 

What are the chances you’ll actually get what you promised? Call me a skeptic, but that’s just not a risk worth taking to me.

However, I’m not 100% against giving discounts. Ultimately, the choice needs to be yours, but there are a few exceptions where I think giving discounts can be a great thing.

 

Altruism

If you want to give someone a discount because they are having a hard time or just because you want to, you are well within your right to do so. 

But before you give a discount, I recommend thinking about your motives. If you genuinely want to help someone and don’t expect anything in return, then I’d say go for it. 

However, if you’re giving someone a discount in hopes of getting a testimonial from them and getting some future business, the word on the block will probably be that you charge abnormally low prices. 

When that happens, your business is more likely to attract people looking for deals and handouts. I find that it’s usually better to do acts of charity without any fanfare or expectations. 

 

Quantifiable Discounts

Let’s say you have a client who regularly does business with you and guarantees you high volumes of work. It makes a lot of sense to give these loyal customers discounts because they give you consistent business without the marketing expenses.

That money saved on marketing is a quantifiable, real number that allows you to give back to those customers in the form of discounts. That way, the relationship has tangible value to both of you. 

Of course, the caveat here is that the volume of work needs to be an actual commitment. If a customer gives you a lukewarm “I’ll spread the word” or “Maybe I’ll schedule work for X dates,” I recommend making sure you communicate with that customer and establish the quantifiable value for both of you.

 

Ultimately, the question of whether to give or not to give discounts comes down to value. You have to look at the value you wish to provide the customer and deliver on that value. If that value is altruism, make the discount an act of genuine kindness. If it’s about loyalty and giving back to a loyal customer who gives you large amounts of business, a discount is a valuable tradeoff for the advertising expenses they spare you

Vague promises and ulterior motives probably won’t be worth the discount in the long run, so I recommend steering clear of those.

Your goods and services are worth what they are worth. When the conversation switches to discounts and price, keep it simple and straightforward and don’t budge. At least, that’s my take on the subject… 

But if you give me a deal, I might give you even more good advice in the future.

—Bryan

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