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Managing price sensitive clients

In a lot of my workshops and mentoring sessions, I constantly hear that clients are getting more price sensitive. The conversation usually turns to discussing how to answer this problem. There are a number of things to consider when working out how to handle price sensitive client. The first stage is to understand how clients make decisions about choosing a designer.

Understand the client decision-making process

Through observation of clients over a long period I think they go through a five-step decision making process when engaging a designer.

  1.  Recognise a need. The client realises they need some help. Whether it’s because of marketing, advertising, or peer pressure, they know they need to buy design services.
  2.  Information search. The client sets out to find more information on the service they need to solve their problem. They talk to a number of designers.
  3. Deliberation. Using the information gathered, the client determines what the options are, and if there are other alternatives or things to keep in mind before continuing. This is where the price sensitivity can develop, and where you can lose your client.
  4.  Purchase. The client determines what to purchase, and proceeds.
  5. Post-purchase. The client decides if this was what he or she wanted, if it was a good decision, if they have regrets or if the design solved the problem.

Emphasise value

In the list above the third stage is where they will make a decision about the value of the service you are offering. The trick is to start talking about the value you deliver before they ask “how much is it gonna cost me?”. Showing clients how you can help them improve the bottomline will do wonders to close a deal.

Let’s assume that you are meeting a prospective client who wants a website facelift. Telling him upfront that you’ll charge him $3,000 for the project and $500 a year for maintenance, will ensure that you’re out of the race.

There are hardly any barriers of entry for getting a website up and running. Websites can be created for about $50 with the help of a WordPress template, if the person is tech savvy. And, there are always people who undercut their competition by predatory pricing. A $300 flat fee for a website revamp will always ring better in the client’s ears.

Here’s a better way to sell the $3,000 web facelift. Explain that you have built over 50 web sites for small and medium business. That you specialise in UX and are a SEO guru. Telling the client how your years of experience can actually convert his customers by persuading them to purchase or make contact.

Nothing beats your guarantee to turn the client’s bland website into a lead generation tool. After all it’s the outcome that the client is paying for, not a bundle of HTML and CSS code.

Sell on benefits not features

I see too many designers selling packages; business packages including logo design, business cards, letterhead templates (but wait there’s more) etc. Selling on an a huge feature set is not a smart idea. Your competitors will quickly match or better the offer, leaving you nowhere to go but to offer lower prices or more features.

Matching the competition feature for feature is something that every studio is good at these days and it’ll take you down a path that’s just unprofitable. Clients just want to get the job done. How well your design can solve their problem is the only thing that counts.

An overworked marketing team might not be impressed by a designer selling a ‘boutique full service agency’. Instead, explaining to them they can cut their advertising spend and increase responses will get their attention.

Develop a business case for design.

Build a cost benefits analysis chart. Help the client understand that the money he is spending is actually an investment in the future. A better RoDI (Return on Design Investment) is a very tasty carrot to dangle in front of them. A 20% jump in productivity using your design always makes the prospect forget the competitor that says they offer more features than you.

Build Your Brand

Brands justify prices. When you are an established brand that has a recall value, you don’t have to work hard to convince people about the value and benefits that you bring to the table.

I know of one design studio that specialises in the property market and they now have such a strong brand they can set premium prices for work in that market.

It has taken quality, consistency and effectiveness to become a brand that property developers open their wallets for.

Match your pricing strategy to your design value proposition

Your price sends a strong message to your clients – but it needs to be consistent with the value you’re design is delivering.

  • If your design value proposition is production efficiency, then your price needs to be extremely competitive.
  • If your design value proposition is thought leadership or customer engagement, a low price sends the wrong message. After all, if a luxury item isn’t expensive, is it really a luxury?

Understand your cost structure

I am constantly amazed at the number of studios who have not calculated the true cost of the services they offer. This requires a close (and constant) analysis of the profit and loss statements. This analysis should also be applied to studio productivity and potential billing hours.

Analyze your competitors’ prices

The base pricing for design studios varies from state to state and then from capital city to regions. There is no sense in offering a premium service at a premium value-add price if your competitors are offering the same at a lower price.

Take the dmzine industry survey to get an annual update on hourly rates in your area.

The end game

In the end you need to move the price sensitive client from thinking about paying for a set of tasks (‘design me a brochure’) to thinking about the returns they want (‘I need a 50% increase in customers spending over $100’). This allows you to quantify the return on design investment and then set an appropriate premium price.

You want more?

If you would like to find out more about premium pricing register your interest for the revamped Job pricing E-course to be released in February 2015.

 

Greg Branson

Greg’s passion is the research and development of methods that improve design management and the role of design in business.

Greg has developed a series of business tools to help designers manage their business better along with a series of workshops that show designers how to use these tools.