Peak Your Profits

Have you ever given a customer or client a product or service for nothing? Something that you would normally send them a bill or an invoice for, but because of the goodness in your heart, you decided to provide it for free?

If you had sent them a bill, how much would it have been for?

Believe it or not, I've had clients give their customers hundreds, sometimes even thousands, of dollars worth of goods and services for free.

Ouch!

Now that's OK, but there is a better way.

Next time, if you're going to give a customer something for free, something that the customer would normally pay for or something that has perceived value attached to it, send that customer a bill. That's right, send a bill but cross out the amount owed and scribble across the statement:

"This one's on us."

"No payment due."

"No charge."

"Complimentary. This is part of our commitment to better serve you."

This language quickly and powerfully conveys the message that your customer could have paid this actual amount, but instead, that amount is now saved.

Why is this approach so effective?

First, it lets your customer know that you made an actual investment of time or money to provide a product or service. Second, it diminishes the potential that your decision-maker will always expect to get something for nothing. But most important, what this strategy really does is create a business advantage with a unique name that I think you'll like.

This strategy is called psychic debt. And the satisfaction of that debt is likely to have a significantly greater value over the long-term future of your business than the few dollars you might have placed in your bank account now, from the payment of that one bill.

Psychic debt creates a psychological sense of commitment or loyalty to you and your business.

Here's one way that I counseled a distributor client, Joe, about psychic debt. Joe told me he was providing free delivery to his customers. If he charged a delivery fee, some of his customers would be paying well in excess of $1,000 a month. Once Joe understood the concept of psychic debt, he applied it, sending his customers monthly, quarterly and yearly transportation or delivery invoices.

The actual amounts they could have paid were crossed out.

Customers now saw, on a regular basis, that Joe truly was providing them with incredible value and tangible dollar savings.

Does the concept of psychic debt only apply to a product?

Of course not. It also applies to your time through consulting, training or the offering of a service. If you provide a client with, say, three hours of valuable guidance or training at no charge, assign a dollar value to that service and then send them a psychic-debt bill.

Profit points

1. Don't give away "stuff" for nothing. Always convey value.

2. Assign a value to your products or services.

3. Send an invoice to stress that value.

4. Cross-off the amount and write a "value message."

5. Realize that psychic debt can be far more valuable than actual debt.