Payroll Companies Thriving in the Current Economy

In today’s rocky economic times, most of your prospects are battening down the hatches, with a “wait and see” attitude.  This has likely made it more difficult to close sales, which is why these are the times when you have to fight 50% more to the same results, or 100% more to get better results.  Here are some ways to battle this decision making reluctance by using discounting to take advantage of the current economy and push all those prospects that are “on the fence” about moving to your service.

Opinions vs. Experience

Before I begin, I want to define opinions vs. experiences.  You know the saying about opinions, how everyone has one and they usually stink (not exactly how it goes, but you get the point).  Well in business that is often a good rule to apply.  I am usually weary of those that offer opinions they have not experienced.  What I look for when I am gaining knowledge from my peers is to learn from their experiences, not their opinions.  That is my goal when I write.  Every now and then I will interject an opinion, but the far majority of my content will be from experiences I have had first hand, or learned through the experiences of my peers.

Pricing

Those that know me know that I hate discounting and being a low cost alternative.  If you are already the lowest in town, there is not as much advantage of creating a great discount program.  Being the lowest in town has other side effects as well.

·         Being cheaper is often a sales obstacle rather than a help because many relate cost to value.  Being the price leader, you are often categorized as second rate (Mercedes vs. Kia).  Those that value what employer services offer lean towards premium service providers.  If you are 30% cheaper than a competitor, many automatically assume you are offering less of a service.  If someone offers you a new Mercedes at the price of a new Kia, you will likely be skeptical.  Your prospects will also be skeptical when you say you provide better customer service at a much lower price, even if it is true.

·         Being cheaper often leads to higher attrition.  Businesses that consider our service a commodity lean towards price leaders.  If I gain clients based on price, I will likely lose them based on price as soon as a cheaper option presents itself.  If I gain them based on one of my differentiators, it is much easier to keep them.

·         Being cheaper leads to lower margins, even with higher revenue.  If I raise my prices 10% and gain 10% fewer clients, my margins will be higher because I am not adding staff or other variable costs.  That means at the end of the day the business makes more money.

Discounting

That being said, there is a time a place for discounting.  In today’s tough economic times, many businesses are more reluctant to change employer service providers.  The reason for change has to be more compelling.  You will still find unhappy clients using another service, which are willing to switch.  However, they are becoming less common due to an increase in the level of dissatisfaction that is required to push them over the edge to switch.

Discounting cannot take the place of your standard ROI or Value Proposition in your sales process.  Moving to you still needs to be a good idea.  But in times where the prospects would have normally said “Yes”, but are now holding back due to market reluctance, then discounting can be just the thing to motivate them to make that “Yes” decision.

Pricing vs. Discounting

Keep mind that this is not telling you to lower your prices.  Lowering your prices devalues your service.  However, discounting your higher prices in tough economic times allows you to keep the perception of a premium service offering, while still being able to incentivize via price.  Discounts can and should be temporary.  It is much easier to remove a discount that expires than raise low prices to current levels, once the economic times have improved.

What to Discount

Find items that are a low cost to you.  Both in labor and other expenses related to offering the service.  Also, items that are viewed to lower the clients cost of doing business is something that will be more appealing to them.  Your standard payroll fees are the last place to discount.  Some examples are:

New Hire Processing

Hopefully you already charge for new hire processing, most of your competitors do and it is a common practice.  However it is almost no cost to you, since our software automatically creates the file for you and they are just uploaded to the appropriate states.  For prospects with moderate or high turnover, this is often a great discount tool.

W2 Processing

This is another service that is relatively inexpensive to offer, but is common place to charge for in our industry.  Discounting W2’s for one or two years can often be the catalyst needed to convert a large employer or one with higher turnover.  It is also easy to remove when the discount is “two years of $.50 W2’s”.  It is also easy to phase in higher prices with a staged discount, “one year of $.50 W2’s and year of $1.00 W2’s”.

HR or Employee Self-Service

Today’s employers are looking for ways to make the most of their existing workforce, by offering them tools to help improve their current HR processes and reduce administration costs.  These are also features that are huge buzz words in today’s environment.  This is not a free feature to you, but even if your discount is just a pass through cost of your expense, it will be significantly lower than any competitors and you will still get the payroll business.  For example, offering "$1 per employee per month HR for one year” will:

a)      Help you sell the payroll

b)      Provide HR revenue in year two

c)       Not reduce your revenue because your processing fees did not change

d)      All while  still being much lower than your competition

Additional Features

Try to discount additional features first before reducing processing fees.  One of my goals is to not reduce revenue of the deal when discounting, but to provide additional products at a reduced charge.  I would rather give $100 worth of additional services for free than reduce my standard processing fees by $25.

Paperless

If you have to reduce your standard processing fees, then do it in a manner that reduces your costs.  Aligning discounts with required paperless processing is a good way to do this, while taking advantage of the current predisposition for companies to be more “green”.  An example of a green package would include:

a)      Online processing

b)      Paperless Payroll (client received reports digitally)

c)       75% Paperless Payments (75% of employees use DD or debit cards and can receive their stub online)

d)      Paperless Quarter End & Year End (all employer copies of returns are delivered digitally)

So in tough economic times you can use discounting for gaining important market share that would have otherwise been unobtainable, without lessening the value of your services.