How do you address potential clients that want to negotiate their price?

Michael,

I think it in inherent in this economy that some kind of negotiation will likely occur. In a purely microeconomic theory, such concessions are price discounts and one has to approach the discounts as a temporary phenomena rather than a permanent one. Microeconomic theory concludes that permanent discounts (or a permanent statement of negotiation) will drive down total revenue without effecting the cost. Therefore, the profit margin is squeezed.

Let's suppose due to a weak market, one can offer a promotional period with a set expiration date. In this way, you're controlling the negotiation/discount period.

Let's also suppose that the your product has a sufficient brand quality that can sustain the 'higher" price. If you do have that kind of brand identity and loyalty then discounting can be resisted without cannibalizing or angering existing users.

If you want to offer a permanent discount, that is also called a price reduction. You might want to approach that with unbundling where you could have levels of membership that gives more privileges as you pay more.

In summary, negotiation and or discounting is a risky process that can either anger new (complaining that the price wasn't low enough) or existing users (how come they don't get a deal because they are paying the full price).