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Tuesday, 27 January 2009

Negotiating Prices

Someone asked me why I wouldn't negotiate our prices with him. There are many reasons, and I thought I'd throw these out there. I'm not the only business taking this approach!

  1. There is only so much profit in my pricing! Please don't assume that 50% of what I charge you is clear profit... it isn't. That would be great if it were, but this type of business is typically not high profit.
  2. Think about the time that goes into custom projects done from scratch. Here is a website designed to help companies quote prices. Look at what sort of time and tasks they are including: http://estimator.astuteo.com/
  3. When I used to negotiate pricing in the 1990s, and let people haggle to get a lower price, I found two things happened:
    1. Our pricing was never taken seriously again. If a year later, I quoted $100 to make a change the client wanted, he wanted to give me $50.
    2. These were our highest-maintenance clients. The people who wanted to pay the least were always the guys who wanted lots of phone time, emails, help, support, etc... I like to give those things, but I'm just saying that after nearly 14 years in this business, I've noticed that the people who pay the least want the most service. I think the people who paid regular prices appreciated our time and expertise, and only wanted to take that time when they really needed it.
  4. You pay for my time and my company's time. So to spend my time on emails or phone calls trying to get me to charge you for X minutes less... while making me spend Y minutes more to deal with you... hey that math is not going to work! I'm going to want someone to pay for that Y minutes of time you just took!
  5. Negotiating is a waste of your time. Your time is more valuable than for it to be spent trying to talk me into doing your project at a financial loss to me! Let's just get on with the project!
  6. I probably quoted your price knowing you would need Z minutes of discussion time about the change, project, or whatever it is. 
  7. I can't match so-and-so's price because so-and-so has a different business model. My team are Americans in America, who are all experts in what they do. I don't hire kids or junior staffers, and I don't pay people minimum wage or just above it as other companies do. I don't send As Was work to other countries. Your As Was Account Manager is not in India. :) I'm trying to help the American economy, and I'm trying to pay fairly. When you pay As Was, that's where your money goes.
  8. I may also not be able to match so-and-so's price because so-and-so doesn't offer the work and relationship that we offer. We are consultants looking at strategy, marketing, branding, design, and more. So-and-so is probably doing a slightly customised version of what he sells to everybody else. If we did that, we could charge much less, but all of our designs are unique, truly custom, and from scratch.
  9. People talk! When I recommend businesses to my friends and colleagues, I might mention what I paid. Our prices are on our website. If each person paid different amounts based on how much or hard you pushed me in negotiations, I think that would make people bitter. If everybody gets the same level of service from us, but you paid $2000 and this guy paid $2200 and this guy paid $1750 and this guy paid $1200, then that's going to be a big mess for me. People will talk, people will want refunds, happy customers will immediately feel unhappy and lied to. That's not good!
  10. We have heard many times over the last year or so that for the level of design that we do, and for the amount of help and personal attention we give people, we could (and should) be charging much more. I have decided that I will keep our prices as steady as I can to try to make us more affordable to more people. But I do believe that for what we do for our clients, we could be charging a lot more. Plenty of companies charge more and give less. :)

So our pricing is our pricing. No hidden extras. No sneaky charges later. No monthly fees. Everybody pays the same. Everybody gets the best attention and service we have to give. No negotiations. We have promotions now and then, but no haggling. I think that is fair, and I think that is good marketing.

Thanks. :)

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