One of the huge annoyances service providers encounter when they start talking pricing with clients is when the client asks you to provide the service for less.
You say you can do a job for $1500 and the next question out of the client’s mouth is:
How about doing it for $1000.
Yeah great way to ruin your day and to start the whole project off on the wrong foot. I think there is a reason that clients do this though and it’s partially your fault.
Intangible
When you hire me to build a website for you much of the work is intangible. I’m a knowledge worker which is defined by Wikipedia as:
Knowledge workers are workers whose main capital is knowledge. Typical examples may include software engineers, architects, engineers, scientists and lawyers, because they “think for a living”.
Your thought isn’t something that your client can touch. They can’t touch the website I built and while they can touch the brochure you designed it is a small piece of paper that cost a lot to print.
Since it’s intangible stuff it’s easy to think that it didn’t take me 6 years of coding WordPress sites to learn how do build huge eCommerce sites. It’s easy to think that you haven’t spent 10 years designing for lots of different fields and have learned what works in some and what just falls flat.
That time spent becoming an expert isn’t something that can be touched by a client.
Since they can’t touch it they easily devalue it’s worth.
That’s where positioning and showing the value of your work come in to play.
Bringing Value Back
Once I’ve decided that a client is someone I want to work with we go over our business goals for the site and make sure we have a plan to measure them.
Measuring data is something that makes sense to clients and it shows them the value that you are bringing to their business.
For eCommerce sites we measure improvements in conversions (if they had a store before) or increase in total sales (if this is their first online store).
For many other sites we look at pageviews (since we are surfacing more relevant content to the user) or sign ups to email lists.
Numbers have a tangible feel to them.
We’ll talk more about value based pricing tomorrow when we dive into price anchoring.
But my client doesn’t have business goals
If your client doesn’t have business goals then why on earth are you working with them? Are they actually invested in the work or is it just something that they feel they should do ‘because’.
I ask for business goals right up front and if there aren’t any my first suggestion is to hire me to help them develop some proper goals for the site. If they aren’t in to that then I’m not in to working with them.
I only want to work with people that I can provide real value for. Value that we can measure.
Reduced prices mean reduced scope
I do understand that some clients may have a smaller budget than their initial vision allows so I’m not against reducing prices on projects. I just don’t do it by reducing what I make.
I reduce pricing by reducing the scope to fit the price.
Say a client comes to me wanting an eCommerce site and they want to use their own custom
payment gateway that interfaces with their bank. But their budget is only $5k.
Their budget doesn’t match their desired features. The site development alone (for me to build the site from a well organized PSD) will start at $5k. The payment gateway will be $1 − 2k.
I don’t say yes to doing the project and reduce my rates to match their budget we look at an existing payment gateway and use that for our site. If that doesn’t work then the client will need find more money to get the work done or hire a different contractor that can do the work while matching their budget.
Take Away
Get and set measurable business goals on projects to show your business value to customers.
Only work with people that want to set and measure business goals since they are the ones properly invested in their work.
If they start drilling you down on price take a real hard look to see if they are someone you want to work with.
2 responses to “Dealing with price dickering”
Another dynamic in the intangible world is the idea of risk mitigation. And it works just like scope reduction.
The very same people who are natural bargainers still want to stay clear of certain risks. So when they ask for lower rates, especially after I’ve articulated my value and expertise, I don’t shy away from letting them know that I can and am very willing to bring the price down, if there are certain things they want to do for themselves.
I can even provide a write-up. But the risk is that they get it wrong, waste time, and have to come back around to pay for someone to fix things. Some people immediately recognize, in that moment, that they’re not just paying for experience, they’re also paying to mitigate risks.
Very true Chris. The sticking point (more so with newer freelancer’s working with smaller clients) is that they just view our services as an expense not an investment and they likely don’t account for their time spent as a cost.
It’s totally wrong I know, but that’s been my experience.
If that’s the case (and the client looks great) then it’s our job to help them make that mindset transition.