Dealing with price sensitive clients
We talk to a lot of designers and many want to talk about their price sensitive clients. Two questions commonly asked early in a client/designer discussion are ‘how much will it cost? and how much do you charge per hour?
There are a few things to consider when handling a price sensitive client … the first is to understand why a client may choose one designer over another. (BTW, that’s one of the questions we posed in our recent What clients want survey – stay tuned – results are due in the next couple of weeks.)
Understand the client decision-making process
We think, based on observing and talking to many clients over a long period, that choosing a design supplier is a actually a five-step process.
- Recognise a need.
The client has to realise they need some help. Whether it’s because of a lack of skill, peer pressure, or lack of sales, they need to recognise the need to buy design services. It doesn’t matter how good your product if a buyer doesn’t have a need.
- Information search.
The client conducts some type of research to solve their problem. Could be they talk to peers, could be they talk to a range of designers. They might use LinkedIn or they might just google.
Using the information gathered, the client weighs up their options: what they need to consider before continuing. This is where the price sensitivity starts, and where you can lose your client (before you’ve actually got them).
The client determines what to purchase, and proceeds. Could be a decision based on price, could be a decision based on many other things. Here’s an article I wrote earlier based on how clients make purchasing decisions.
The client decides if the purchase was successful – did they get value from the transaction?
Persuading a price sensitive client
First step to persuading a price sensitive client is to steer the conversation toward the value your design solution will deliver before they ask “how much is it going to cost?” Demonstrating how your design solution will return value does wonders to close a deal. It shows you understand their business, and it gives the design a value removed from subjectivity.
Your challenge is to start selling your design value while they’re doing the research. This is where competitor knowledge is valuable. Chances are your competitor’s website will sell their industry knowledge, track record or proprietary software. If so, this is your chance stand apart. Take the divergent approach and sell on value. Demonstrate how you can add to a client’s profit margin. Do that by understanding your design value proposition and have case studies written, ready to prove you can deliver.
Sell on benefits not features
Many designers sell features: their studio location, studio size and/or services. Problem is, competitors can quickly match or better, any of these offers, leaving you nowhere to go but to offer lower prices or offer more features. We all have similar studios, software and skill sets. Trying to out-match your competitors feature-for-feature will quickly take you down the path of doom.
Besides, features are not that attractive to most clients.
They just want to a problem solved.
How well your design can solve their problem is the only thing that counts.
An overworked marketing team might be unimpressed by a designer selling a ‘boutique full service agency’ but explaining how they can cut their advertising spend and increase response rate has got to be attractive!
Develop your business case for design
Build a cost benefits analysis chart. Help the client understand the budget will be returned, that it’s an investment in the future. A better RoDI (Return on Design Investment) is a very tasty carrot to dangle. A percentage jump in productivity/sales/clicks gained by using your design solution always makes a prospect forget about a competitor offering just features.
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 of design delivered.
- If your design value proposition is production efficiency, then your price needs to be extremely competitive.
- If your design value proposition is thought leadership, a low price sends the wrong message. When is a high-level skill discounted?
Understand your cost structure
It’s imperative to calculate the true cost of your services. Start with a close (and constant) analysis of the profit and loss statements, then use your project management software to diagnose studio productivity and potential billing hours. Together, these two sources will show your true hourly rate. (Not sure, it’s in the book 😉 )
Analyse your competitors’ prices
The base pricing for design studios varies from state to state and 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. But don’t reduce your prices — instead, look at the value you offer compared to your competitors and emphasise your difference to the clients. (Your DVP.)
The end game
In the end you need to move the price sensitive client from thinking about paying for a task (design me a brochure) to thinking about the problem design can solve (I need a 50% increase in customers spending over $100). It’s only by getting clients to this type of discussion you can quantify the return on design investment, prove your value, and set an appropriate (premium) price.
If you’re not sure about the next step, as always, happy to discuss, just email.
Here’s more information around pricing:
- When to increase your pricing – is there ever a good time?
- Costing on hours, selling on value.
- Identify your studio’s strengths and weaknesses.
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After 30+ years running a graphic design firm, I pivoted from client-focused projects to consult to the design industry. Now with the Design Business Council I use my experience, and research, as a design mentor and coach. I help designers build robust, sustainable businesses, and help businesses integrate, and profit from, design.
The core of the DBC is the building a design community – over 85% of designers work in businesses with less than 5 employees, many less than 3. That means designers don’t have the same support network of other professionals. The DBC’s solution is supplement paid gigs with research, mentoring breakfast meet-ups, informative UNseminars and practical workshops in Melbourne, Perth and Sydney.