Don't Cut Prices - Reduce Your Offering Not Your Price - RD190

No matter how nicely a client asks, don't cut prices.

[sc name="pod_ad"]Does this sound familiar? You present a quote for a design project, and the client responds with, "Is there any way you can cut your price?"

If you haven't heard that question before, or something similar, it's only a matter of time. It's almost a right of passage for home-based designers. Because you work for yourself, some people think they can haggle with you as if you were selling your services at a yard sale.

So what do you do when someone asks you to lower your price?

My advice is never lower your price. On Resourceful Designer 113, I talked about offering discounts. In that episode of the podcast, I shared six valid reasons for providing a discount, and three times you shouldn't offer one. Can you guess where "Because the client asked for a discount" falls?

If you lower your price, you'll be setting future precedences. Once a client knows they can negotiate with you, they'll never take you, your services, or your prices seriously again. You'll become a discount designer.

Even worse, the client may start spreading the word that your prices are negotiable, which is not the kind of reputation you want when trying to grow a business.

Hopefully, you're in a good enough financial situation that you're ok with possibly losing clients if you don't cut prices.

But what if your financial situation isn't stable? What if times are tough and bills are piling up? Or you just started your business and money hasn't started flowing in yet? Or for whatever reason, you cannot afford to turn down clients. What then?

That's a conundrum. Lowering your prices may bring in a bit of money now, but it's bad for future business. Whereas not cutting your prices may drive away clients, which is bad for your present business. So what's the solution?

Don't cut prices, lower your offering instead.

What does this mean? It means you can appease your clients and meet their lower price expectations, but only if you equally lower the service you're offering.

Look at it this way.

Imagine a contractor gives you a quote of $9,000 to completely renovate your bathroom. You think that price is a bit high, so you ask if there's any way he can do it for less?

The contractor replies he can do the job for $7,000, but only if you choose a laminate countertop instead of granite, and choose a ceramic tile for the flooring instead of marble. He lowered the price by reducing the offering.

You can do the same with your design services. Don't cut prices. Instead, offer fewer services for a lower cost.

For example,

If a client thinks a web design project is too expensive, offer to lower the price in exchange for a three-page website instead of a six-page site.

If a client thinks your logo price is too high, offer to lower it by providing only two initial concepts instead of three, and allow only a single round of revisions instead of two or three.

Whatever the design project is, lower the price by offering fewer services or features. This way, the client gets a lower price, but you also reduce the amount of work required to complete the project. The client will appreciate you accommodating them, but they won't think they are getting a discount since they're still paying full price for the reduced services you are offering them.

And you know what? When you lower your offerings to lower the price, many clients will decide to stick with your original higher price for the extra value.

This is a similar concept to Three-Tier Pricing. Implementing a three-tiered pricing strategy is a great way to prevent people from asking you to lower your price because it's built right in.

A three-tier pricing strategy works by offering a client three price options, the middle price being the one you hope they choose. The lower price option cuts back on the provided services, and the higher price option adds in extra perks and bonuses that may not be necessary.

The reason a three-tier pricing system works so well is that the human brain is wired to compare things to the first item it sees. If you go into a store to buy a new shirt, and the first shirt you pick up has a price tag of $40, then subconsciously, you will compare every other shirt in the store to that first one. A $60 shirt will seem expensive by comparison, and a $30 shirt will look of lesser quality compared to the $40 shirt.

This is why you see three-tiered pricing so often used for online purchases. In most cases, the middle price is labelled as "Best Value" or "Most Popular." It's a way to subconsciously embed that middle price as the focus element in the viewer's mind. When they see it, their brain automatically registers it as the base price. The higher price on the right may seem too expensive, and the lower price on the left won't feel like a good deal compared to the middle one.

The other benefit of three-tiered pricing is that instead of the purchaser wondering what other options are available elsewhere, they often use the three prices in front of them to make their decision.

But even if you don't use a three-tier pricing model, it's a good idea to use the lower-tiered strategy to lessen your services or options to reduce the cost should a client asks if you can do something for less.

Hopefully, you won't be at this stage for too long, and your business will be successful enough for you not to have to cut prices. Instead, you can reply, "This is the price for what I'm offering." and leave it to the client whether they want to work with you or find another designer. If they decide to hire you great. If not, no worries, you have plenty of other clients vying for your services.

Hopefully, you understand that lowering your price is never in your best interest. You have nothing to gain from doing so. You're now prepared not to offer a discount, but offer a lesser service that is more in line with what the client is willing to pay.

Don't cut prices. Lower your offering instead.

Do you use this strategy?

Let me know by leaving a comment for this episode.

Resource of the week A good office chair

You can get by as a home-based designer with old computer equipment and inexpensive software, just don't cheap out on your office chair.

On average, a home-based designer spends between 8-10 hours a day sitting in front of their computer. If you're going to spend that much time sitting in front of your computer, you really should invest in a good quality, ergonomic chair. Something comfortable for long periods.

Trust me on this one. Your health, especially your back, will thank you for it.

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Running a graphic design or web design business all by yourself isn't easy. If there are any struggles you face running your design business, please reach out to me. I'll do my best to help you by addressing your issues in a future blog post or podcast episode here at Resourceful Designer. You can reach me at feedback@resourcefuldesigner.com