Why you shouldn’t discount your psychology and therapy services (and when I do)

Why you shouldn’t discount your psychology and therapy services (and when I do)Hello and welcome to The Business of Psychology Podcast. Today I am talking discounting; the reasons you might want to do it, reasons it can be a pretty dangerous game, and the reason that I am doing it for the first time in a few years! Full show notes of this episode are available at The Business of PsychologyLinks & References:Episode 109: Ethical marketing in private practice. Scarcity, should we use it?The Psychology of Discounts: 8 Researched-Backed Strategies for 2022 (Namogoo.com)Start & Grow: The Complete Course for Psychologists and Therapists - Psychology Business SchoolRosie on Instagram:@rosiegilderthorp@thepregnancypsychologistLet's start with some behavioural science and the reasons we might want to discount.Reasons to discountThere is some evidence that discounting can give people a rush of oxytocin when they feel that they've had a good deal and actually that the excitement can last and promote better engagement with a product or service. There's evidence that 70% of millennials look for a discount before purchasing, and it might be the deciding factor in whether they go ahead.For lower cost items, there is also some evidence that it can increase the perception of value and quality. The “I only paid 20 pounds, but it's worth 50 pounds, so I love it even more” effect, or as I like to call it, the “Vinted” effect.It can drive that sense of scarcity and urgency if it's time limited, which means that people who are sitting on the fence or who wouldn't ordinarily make a purchase do so, and that can have ethical problems. You heard me talking about that in the scarcity episode of this podcast. It can be a good thing too, especially if you've got a product that people tend to procrastinate about buying and you want to help nudge them to make a decision that they would've made eventually anyway, but they might have put off for a while. None of those, you might have noticed, really apply to therapy services because we are not in the low cost bracket, and we're a service that people need to access when the time is right for them, not when a special offer is running. However, sometimes there are other unique reasons that we might want to consider using a discount for a therapy service specifically.A Bridge to Price Increases For example, we might want to use a discount in a therapy service as a bridge if we have to make a big price increase, and we know that our current clients might struggle with that. For example, and I'm sorry to say that this might apply to quite a lot of us at the moment, if your room rental has gone up by 20% and so have your energy bills, you might want to take a staged approach to passing that onto clients and discounting can help you to do that. If you've had to make a really difficult decision, like a significant fee increase, because your overheads have increased, it can help soften the blow for existing clients if you're able to do that. Early Bird DiscountsAnother reason to discount is if you want a flurry of people to join something that you are doing for another good reason. Because of that urgency effect, discounts can be really good at driving a whole bunch of people to make a decision to buy from you at the same time or in a small window. This can be really helpful if you want to incentivise early booking for a good reason. For example, people often offer an early bird discount on events, and that's actually because they can then use the money from the early bird sales to pay for the upfront costs of running the event. It can really help with cash flow, and it means that they can safely invest in things that are going to make the event better for everybody. It might also be that you offer an early bird discount in the hope you'll fill up spaces on something like a group program early, and that makes a better group experience for everybody because it means you've got more time to plan, think about group dynamics, make sure that if you're doing it in person you've rented the correct size space, that kind of thing. If all of those sales trickle in and you don't really know when they're going to happen right the way up to the deadline, then it can be a lot more Or it could be that you've invested in something new and you might want to use an early bird discount to try and recoup some of those costs as quickly as possible. So having it as part of your tactics for a launch of something like an online course (for example) might mean that you are safely able to invest in more stuff that makes that course better, and that can be a really good reason for doing it. As long as you've weighed up those ethical concerns that we've spoken about. If you want more detail and references to the studies that have shown any of those effects that I've spoken about, have a look at the Namagoo blog. I really like it. I think it's really, really interesting and it talks about the neuromarketing and behavioural science behind all of those concepts.If you are selling an online course or another product as part of your practice, especially a lower cost one, you might be tempted by some of those reasons to discount, and as we talked about in the scarcity marketing podcast, I think that there are some real reasons not to do it. There are careful ethical considerations we need to make when we are considering discounts as urgency and scarcity driving tactics. In particular, you really need to consider whether people's nervous systems are in the right place for it, or if it could tip them into making a decision that they end up regretting amongst other issues that we talk about in the podcast episode.I actually do it very rarely with my courses. If you've been on my email list for a while, you might have noticed that the last discount I offered was years ago, and that's because it can be very damaging. So I'm going to tell you now about some of the reasons why it can be a bad idea, and then I'll explain why I'm, in fact, offering a discount at the moment (until September the 22nd 2023) for the first time in a long Reasons not to discountIt can really damage the perceived value of your serviceThis can be explained through the behavioural science concepts that we talked about in the last series, like price anchoring, framing, and scarcity. Other services can become a price anchor If you are half the price of the private psychiatrist they saw, they're going to perceive you as half the value.Your previous price might serve as an anchor If they know you usually charge £150 but you discount to £100 a session, just for them, perhaps they might perceive that you are not doing very well in business and you're effectively trying to get rid of all your slots. Think about if you go into a high-end fashion store; maybe if I go into French Connection and their jeans are normally something like £120, way out of my price range, but I see that they've got a discount rail and on the discount rail I can get some of their jeans for £30. Do I think that that's a good deal? Or do I think that those jeans are on the discount rail because there's something wrong with them? Maybe they've gone out of style, they're not as fashionable as they used to be. That's the risk you're taking when you discount your therapy service. Some people might just be grateful and they might think, “Wow, they could have sold this space at £150, but they've given it to me for £100, what a great person”, but actually what the studies tell us is that the majority of people will just think that you can't sell your your spaces for £150, and so you are discounting it out of desperation. Basically they'll perceive your services as less scarce and therefore less valuable as they believe you're desperate for clients, or at least not very busy. You can see the scarcity episode for a bit more detail on that. FramingIf you discount your service, then you might be framed as similar to low value services that they use in the rest of their life that they might take a more...