I recently lost a potential contract to price. My main competition came down to a price that was about 1/5 less than mine, but the client wanted to work with me more. I assumed that meant that the client would find the money needed for what they assumed was going to be a better experience. They really wanted me to drop my price and match the competition. The first rule in service pricing is this: There is always someone who will do it cheaper. Always.
The issue, given the poor state of the American economy, constantly boils down to price. Is the problem price because the service has been commodified: “How much is one Website”? Is the problem price in that all money is being shunted away from advertising?
If the problem with the price boils down to commoditization of services, I’ve always found that treating the idea of the services as a large investment commodity (how much is a car?). If, on the other hand, the price boils down to a shift of funds away from advertising and into R&D or other aspects of the business.
In the short term, that makes good sense: marketing and advertising are actually investments – you spend the money now for greater brand recognition, greater leads, better sales tools, and so on in the long run. The shortsighted part though, is that those groups who continue advertising efforts through tough economic times come out over 200% ahead of their competitors who cut back during a recession. By reevaluating & re-channeling advertising dollars, by reaching for creative but cost effective solutions, and choosing to really getting to know the customer base; companies can thrive.
One example of cost saving is e-blasts. Sure, as a programmer I don’t like to code them nor do they make me much money because they are pretty quick to design and code; but they make, on average, forty dollars to every dollar spent. Direct (snail) mail pieces on the other hand? 5 dollars to every one is the best one might hope for. Re-evaluation of the whole strategy with a cool head can often return large dividends.
Please comment and let me know some ways you helped get around price and educate your clients. Or, if you think I’m full of crap, let me know! Either way, share your experiences in the comments.
