May 26, 2016
This week I personally encountered 2 scenarios around pricing that really made me think. We have done an awful lot of consideration around pricing as a business as I hope many business owners do and I found these situations to be relevant to the overall discussion around pricing.
The two scenarios are as follows:
I called a company looking to switch from their services to another provider. As many have experienced, it almost turns into a negotiation to keep your business, usually with the promise of lowering my bill or giving me free stuff. And my immediate reaction was, “Just to be clear, you can afford to charge a lower rate, but you simply choose not to, even when comparing apples to apples?”. Needless to say, they didn’t keep my business.
A potential client of ours received 4 or 5 proposals from a number of companies. It ended up whittling down to just our company and another. Our proposal originally started a good amount under the competitive quote, and through a series of communications, the competitive quote was dropped about 30% in order to get the business. The response to me was, “What can you do?”
Web design is probably like a lot of digital businesses out there where it’s always a thought provoking experience to figure out how to price. Do you price hourly or by project? Do you base it solely on hours or do you price it based on value? Do you get creative or simply bill it as simply as possible? Without even trying to determine the market price for your specific local area, you can see how quickly this becomes very complicating.
So, what specifically did I take away from these two scenarios?
First, what really grinds my gears is an absence of value. My comments to the gentlemen on the phone in which I was switching services were focused around the idea that without some kind of value proposition, what is the justification for charging more? I completely understand that with a different amount of money we should be talking about a completely different level of service. Where I have a problem is when someone is under the impression that they should be charging more, providing less, and act like everyone is getting a sweet deal when they knock a few bucks off the price when someone threatens to leave.
Second, don’t undervalue yourself and your industry by acting like pricing is trivial. My response to “What can you do?” was essentially, “Apparently nothing, because my pricing is based on producing the very best result for you and your business. Compromising that is compromising the quality of the work you get.” This is what I would call a lose/lose proposition, because in many cases no one is happy with the end result. The provider doesn’t feel the same sense of urgency and dedication to providing a quality result, and the client isn’t satisfied with it because of that. So in the end, they paid far too much. It isn’t, in our opinion, worth undervaluing your work to win a project. It’s totally understandable that the argument “You gotta pay the bills” is out there, but you should expect to be too expensive at least some of the time. If it happens to much, then you know you have a price to value problem.
By compromising your value, you set your business up for further compromise with each additional proposal you write. You may even have referrals that expect to fight a little on the price knowing you think you charge too much and you will buckle if you feel you may lose the project.
The Bottom Line
Obviously, the debate around pricing can encompass not just a large article, but a vast number of responses. Our personal stance is this: be proud of your pricing. Have the foresight, the guts and the gal to defend it when questioned. Make sure people know why you charge what you do.