Saturday, February 6, 2010

What is your value worth?

The recession is tough on everyone right now. It doesn't matter if you've kept your job (but thank your lucky stars!) or had to reinvent yourself; this recession has absolutely touched nearly everyone in America, if not, the world. Most businesses are trying to keep customers happy without losing their take-home profit; most consumers are trying to get as much for as little cost as possible.
So how do you answer the all-too-often-posed statement: "That's too expensive."? Usually I hear this statement coupled with, "I can get it over here for a lot less!" or something similar. I also found out I'm not alone; in the past few weeks since the new year, I have had the pleasure of listening to my colleagues complain that a customer beat their price down, and in order to retain the client, they felt they had to compromise.
I asked my colleagues, and now I ask you: What is YOUR service worth? Most people don't realize when you ask someone to cut back on their commission, they are asking you to cut back your take-home pay. If the situation were reversed, these consumers would be furious at being asked to reduce their take-home pay. So why, then, do they have no guilt whatsoever in asking us to do this very thing?  I told my colleagues to stand firm with their prices. I reminded them (and myself) they have to make a living and can't do it if they are constantly reducing their hourly rate. Several of us surmised that, when asked to "defend" our prices, we find we do the exact opposite - we reduce them to avoid conflict.
Educating Our Clients
This isn't much different than a plumber helping a client find the water shut-off valve over the phone. In order for our clients to be smarter about their choices, we must educate them about our industries. Now, I don't mean you pull out the school desk and give your client a true/false test about your business! But, you do want them to understand you're not gouging them; rather, you are getting what your time is worth and its perceived value based on past client's information and a current price model for your industry.  The trouble is, most clients want your service! Hands down, they trust you and want to buy your service – period. So why does this process then become about as painful as a root canal?
Time IS Money
Consumers really do not understand that your time not only must be accounted for, but receive payment for contracting your expertise. Absolutely your clients can get lower pricing elsewhere! Aren't we also shopping for the best deals in town? Yet the last time I can remember arguing with someone over their price was about fifteen years ago.
Here are a few thoughts I learned from my colleagues and readings this week: 
1. Educate your clients. When a client questions your price, remind him/her of the benefits your service brings: a) saving time, b) saving stress, c) saving money by not having to do it more than once, d) the increase to their business by utilizing professional services, freeing up their time to run their business.
2. Talk about "the cost". In other words, take the words, "my price", or "my cost" out of the picture entirely. The client can then "see" the numbers rather than what you will make.
3. It's a haggler's market. Many professionals realize they have to take whatever jobs come alone to keep their businesses going during this recession. That does not mean, however, business owners have to sacrifice their own welfare at the same time. For example, if taking a client means you end up trading the cost of materials with the client and not getting your hourly rate, you are sacrificing what you know your value is worth. When you make this sacrifice, you devalue your industry, making it harder for others in your industry to make their hourly rate also. 
4. What's my target market? Remember your marketing plan (don't say 'what marketing plan'!) and ask yourself, "Is this client within my target market?" If not, rather than take on the client, see if a colleague may benefit more from a referral.
5. Is this client worth it? This goes back to not getting your hourly rate. If the client is trying to cut your cost now, are they going to nit-pick everything you do and complain about every nail or keystroke you make? Some clients may be more high-maintenance than others. Certainly they deserve the services you provide as much as anyone else, but at what price for your business? Will that price be worth whatever sacrifice you make in order to retain this client?
6. Is perception a true indicator? This is a last reminder about educating the client. Business owners, being captains of their particular industries, have to price-check against what their competition does on a regular basis. This helps us arrive at our hourly rate for the perceived value of our services. Clients also price-check, but they may not always see the "big picture" when it comes to the value your service will bring them. Remind the client the benefits of using your service, to include saving them time and frustration - and they'll be glad they called you.


Anonymous said...

We are our own worst enemies when it comes to rates. Recently I had a client contact me in mid-project to tell me they were "going in another direction," but "it doesn't mean we won't work with you on future projects."

What they meant was one of the partners showed my preliminary work to his art school friend who said she could do it for a sixth of my price, so they handed it to her and figured the dangling carrot of "future projects" would keep me quiet. It didn't.

The work that was done by this art student was bad. Not just from a design standpoint but also from the ability to use the logo on different backgrounds, as two color, as a digital image, etc. Moreover, their brand looked like it was fourth rate because it was.

So, this student ended up with a few hundred dollars and "portfolio piece" and now the client will use her but won't pay a fair market rate. She will undervalue her work for other clients who will believe they can get something for nothing, and so on and so on.

Yes, times are rough but I personally thank a client for speaking with me when they lowball rates and walk away. In several recent occasions, the client has returned to ask me to clean up the mess the cheaper designer made. It's usually followed by the plea that they spent their budget and could I do them a favor that they will "remember in the future for other jobs."

I doubt my landlord would do me the favor of forgetting rent for a month or two because I will live here for a while and pay rent in the future.

Lisa Raymond said...

Very well put. It is unfortunate that many industries have suffered the fate of "lowest price wins" since the begin of the downturn. In many cases "lowest price wins" doesn't include "honesty" or "quality workmanship". It's too bad the one client had to learn the hard way that cheapest isn't always best. Professionals are not the cheapest in their profession, but will always stand behind their work and keep to their industry's standards.

Someone in my referral networking group this morning (3/4) spoke on this very subject. "How much are your services worth?" he asked our group. In every case we answered (individually) it depended on the job/project requirements, such as how large the room is for the carpet cleaner; how many panels and whether or not content was supplied for the brochure; how much research and bookkeeping prep was needed for the CPA; whether someone was needing cleaning for one month or weekly for the cleaning lady; and so forth. Bottom line: without knowing the full scope of the job or project, it is impossible to give an accurate quote. He also reminded us we are not here to lowball our industries; rather, we are here for referral network marketing because we trust each other's work ethics and performance. Period.

I've also had clients tell me, "Well, so-and-so can do this job for much less." I have begun asking questions such as: "Do they stand behind their work?" "How many comps and how many revisions did they agree to give you for that price?" "Is this a flat rate, or are they charging you per hour?" "Will they contact the print shop to make sure they know their requirements, or are they just sending the file and crossing their fingers?" "Do you know if this provider uses industry-standard software?" And, most importantly, "What will this provider do if the finished product does not meet the specifications of the contract you both have signed?" In some cases the clients come back to me because of the depth of questions I have asked. Those that are merely tire-kicking are free to do so, but these customers are not valuing the quality of the work - they merely value the quality of the dollar.

In the case of your client that backed out of the pre-arranged job in mid-stream, I hope there was a clause in your contract that stipulated a cancellation fee in just such a case. If not, no worries, but please make sure to include such a clause before your next job to protect yourself from another "going in another direction" mishap.