So, a few weeks ago, I offered up a competitive bid on a project for a commercial writing client I’d done some good work for some time back. The graphic designer on the project (we’d submitted a “turnkey” project bid) had actually worked for the client for 10 years a while back, had the inside track, and knew all the players. They did tell us they’d be looking at several bids, but we figured that was just a formality (after all, they were a government entity, so they had to go through a “competitive bidding process”). Yeah, buddy, we were in like flint.
Well, guess what? They went with a lower bid. Hmmm. Just an anomaly or a “bad economic sign”? Depends on what you decide, I suppose.
Fast forward to last week. It hit me as I was putting together a quote on a project for a prospect who’d called me out of the blue. I knew what I’d normally charge (and get) for a project like this, but found myself wondering if taking the business-as-usual approach was wise in a time when things weren’t quite usual. With the prospect’s admission that he’d be talking to several other writers echoing in my head, I shot a bit lower than I would have, say, a year ago. Still a healthy fee – we’re only talking maybe 10% lower than normal – but the fact that I was playing the game at all pissed me off.
Okay, so I’m a bit torn. Part of me hears my voice admonishing commercial writers: “Don’t play the price game! You’ll lose because there will always be someone willing to do it for less.” Absolutely true. And, “Stick to your guns; the good clients will always pay for quality.” Also true, and I’m working for several of them who haven’t made a peep about wanting me to charge less (and this new guy has no direct experience working with me, so he hasn’t yet gotten to the point where my competence trumps any price sensitivity). And the new year is off to a bit slower start than usual, so maybe that’s part of it.
But then the other side ponders, “Should I be a bit flexible these days? Are clients getting more budget-sensitive?”
So. Am I making a mountain out of molehill? Am I losing my nerve? Or just being realistic? In case all of you think that us seasoned folks always have it all figured out, think again… 😉 Love to hear from you guys about what you’re finding out there…
Are you finding price is becoming a bigger issue these days with your existing clients?
If so, are you becoming more fee-sensitive these days, making adjustments for changing times?
Or, even if it is, are you refusing to play the game at all, charging what you’ve always charged, because, by George, you’re worth every penny?
Friend sent me a link to a great post on this very subject from Massachusetts writer Erik Sherman, where the writer shares his actual note (and a dissection of why he wrote it like he did) to a client agreeing to his proposal to reduce his fees because of some serious financial turmoil on the client’s part. Check it out here.
PB
Peter, I saw your comment on my blog and so checked out this link to your earlier post. Given the way you described the situation, I think you might be off in the way you’re approaching this, for the following reasons:
1) Yes, economic times are bad, but not everyone is doing badly, and not everyone has a smaller budget. If you drop your price in advance, especially with someone you haven’t’ worked for before, you weaken future negotiations and might even be doing so for no particularly good reason. Don’t judge someone else’s bank account by loud sounds of panic from third parties.
2) If someone is primarily motivated by costs, then the person will keep looking to cut costs, extending the pricing negotiation throughout the length of the project by asking for more of this or that, being slow on payment, and so on. It’s not necessarily the type of business you want.
3) Don’t let the mention of other writers bother you. Clients are almost *always* looking at various solutions and providers. To bring it up is a negotiation tactic in which the person thinks he or she will get a better price. So send your regular price and they will still think they’re getting a break because they don’t know what you’d normally charge.
4) Rolling back pricing because of the economy only makes sense when you get the client to appreciate the value of the concession on your part. If you haven’t done business before, they don’t know they’re getting a break. You’d need to get them to understand what you *would* have charged and that you’re only doing this because of the economy. And, as I think about it, that argument sounds really weak to me. Better you offered it as a one-time discount for a first project.
5) If you are giving in on price, is there something you can get in return? One writer on Freelance Success who had responded to my post there noted that she had gotten a guarantee of work over a year from an existing client that needed a drop in rate. Guaranteed work has a specific monetary value that you can calculate and then weigh as part of your decision process.
6) The answer to slow business is not to drop prices, because then you are branding yourself a commodity by the action. Instead, significantly increase the amount of marketing. This becomes particularly important for writers who are established because it’s easy to get used to an incoming flow of business from referrals and repeat clients. What is happening is that your converstion from marketing to assignment ration is decreasing. To avoid losing income, increase the pool.
7) Also remember that many clients will complain about the economy because they’re hoping to get more for less. It’s not that they can’t afford your usual rates. They just want to see if they can get you to drop them. Do so, and you’ll never get them back up again.
Erik,
Good points and well made. But understand this: I didn’t “drop” my price in the client’s eyes. It wasn’t as if I gave him a price and then lowered it under pressure, or even told him I was giving him a lower price than normal. He didn’t have any idea what my rates were. All that rate-drop discussion was going on in my own head. And as it was, he got delayed in moving forward (or so he says) and it’s never come to fruition…
But, all in all, you’re preaching to the choir. After 15 years in the business, trust me, I know all the games clients play to get a better price, and I’d do the same thing if I were in their shoes. When I wrote that post, I was in the midst of a very temporary nail-biting period, which has since passed. I am now working with several clients who haven’t put any pressure on me to do any price-dropping. All they ask of me is if the fee range I’ve given them for a project, say $1500-1800 actually comes in, time-wise, closer to the lower end, to only bill for that. And I do that anyway.
Thanks for the input – very worthwhile contribution!
PB
Peter, I understood that the client didn’t see the price drop. But that is what would have presented a future negotiation problem, because he would have expected that pricing to be normal. That’s why it’s easier, in a way, to lower pricing with someone who already knows you. Probably the range approach makes the most sense for new clients, so they feel some control over the financials. And then, when they realize that they needed more, you can give them a break (not give it away) on the incremental work, setting the proper tone going forward and still increasing your revenue.
Hi Erik,
I understand what you’re saying, and you’re right, but in my mind, it’s a theoretical concern. Meaning, I was pricing a web site of x length pages. How can someone compare that to any other project in the future? It’s not as if there was going to be another web site of exactly that length or even another web site, period. And if I then priced a brochure later at, in my mind, my normal rates (higher than earlier), how would he perceive that? Every project is different and it’s nearly impossible to tell the difference (especially when, as mentioned we’re talking a 10% difference).
Yes, I DO get that you’re talking about a general mindset on my part that can hurt me in the long run, but it wasn’t very long-term at all.
I liked the first line of your post: “Circumstances and the general environment can change your negotiation strategy because they can change your relative judgment of value.” I hear that in a few ways, one being that if (and it may not have been what you meant) I’ve got plenty of work, I’m going to be far less likely to want or need to discount my rates than if suddenly none of my clients are returning my calls and the ones who are are telling me I’m too expensive. Unlikely, I grant you, but you get what I’m saying.
As much as we’d all love to say we’re always going to “stick to our guns” on price no matter what, reality can change those convictions… Thankfully, I’m a good writer whose clients value what I do for them, and so I haven’t had to deal with any truly serious fallout from the economy as yet…
PB
>> How can someone compare that to any other project in the future? <<
Because there’s a good chance that he got other quotes and placed you in the continuum somewhere. It never pays to underestimate the purchasing intelligence of a buyer, particularly as the size of the company gets larger. Their research and negotiation skills often outstrip that of vendors (which includes people like us). For example, in high tech, savvy customers often know more about the pricing policies and practical constraints on their vendors than the vendors do themselves. It sounds silly, but it’s not.
Yes, one of the ways to take my statement on relative value is the way you did.
Also, I’m posting to this length not just for you, but many of your readers who may not have the same degree of business savvy.