I have trouble understanding the idea of the following flashcard. Some additional thoughts would definitely help. Thanks!
Why is it a bad idea to reduce fees during a downturn?
Response: Opportunity cost and the risk of locking into discounted rates even after the downturn has ended.
Hi Oana-
It may be a bad idea to reduce your fees in a downturn because you may run the risk of your clients getting used to those reduced fees. When the downturn subsides, you may want to raise your fees back to their higher limit and your clients may be unwilling to pay the higher fees because you performed your services at the lower rate in the past. Of course this is not a hard and fast rule, but a situation in which you need to weigh the risks and benefits- and the risk is that your client may be unwilling to accept higher fees in good times. I hope this helps.
Marc