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    5 Replies Latest reply on Oct 22, 2008 5:25 PM by iventures

    Are you cheapening your way out of business?

    Iwrite Pioneer
      The economy is bad, I get that.

      Loans for small and medium businesses have dried up, I understand that also.

      However, this is no reason to be "cheap." I'm not talking about being "responsible," I'm talking being plain old "cheap!"

      Who am I talking to? Everyone.

      If you are selling a good or a service - stop selling at a price so low that it lessens your brand. If you are buying a good or a service - stop shopping price when you should be focusing on quality.

      Cheap is bad - whether you are buying or selling. You really do get what you pay for.

      The price you are selling at speaks volumes to the customer buying it. And the price you are willing to pay dictates the level of service you are going to receive.

      Yes, times are bad but as a small business owner, if you are going to survive, you are going to have to separate yourself from your competitors and the best way to do that is to claim the quality stance. What does your price say about you and your product? How loyal will a customer be to you if they come to you for a cheap price?

      I understand the first response to bad times is to lower your prices, but I encourage you to stop and think about who and what your business is. And after you have done that, find a way to communicate to customers why your goods or services are worth the price you charge, build a relationship with your customers, promote loyalty, raise their perception of you that of a source and less a simple provider of goods and service. Position your business for the good times, when customers can afford to go anywhere but choose to show with you. Own the quality story, make it yours.

      Now, for a little family business. To the advertising/design industry people that are on this forum, "STOP IT! STOP GIVING AWAY YOUR SERVICES!" You are only hurting yourself and your clients. Divide your current prices by the amount of time it takes you to deliver a project, and tell me if that is really what your skills and experience are really worth? I am not ashamed of my price. It comes with over 20 years of experience and knowledge in helping clients grow their business, and I am worth every penny I charge.

      I know that this is big talk but I have recently lost two projects because the budgets were too small. I could have used the business but I couldn't afford to lose money in the process. And more importantly, I could not afford to cheapen my brand.

      Ask yourself, "Are you cheapening your way out of business?"

        • Re: Are you cheapening your way out of business?
          Lighthouse24 Ranger

          I do understand your point. There's also another side of the story. I enjoy doing what I do -- and I can do certain things with the same quality, but at a lower price (which effectively reduces or eliminates my profit on those things). Why would I do that?

          Let's say that someone wants to book me for a speech or in-house training session, but can't afford my normal fee (it isn't that they don't think I'm worth it -- they just really don't have the money). My choices are to turn down the job or lower my fee.

          If I turn down the job, nobody is any better off. If I lower my fee, I get the work -- and they get the benefit of my program (and they get it for a real bargain, which may leave them feeling a little like they still "owe" me, and that usually leads to more business down the road).

          There are certain programs and services I provide to government entities, and the prices/fees on those are audited (i.e., by law, I can't offer someone a lower rate than I'm giving the government). Beyond those, things are negotiable. Would I agree today to give a speech next April for free? No. Would I agree today to give a speech next Wednesday for free? Probably. Because I'm available that day, and I'd rather work than not work.

          I'm guessing that maybe some of the people (designers, developers, etc.) you are urging to "STOP IT!" feel the same way. They're available and want to work.
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            • Re: Are you cheapening your way out of business?
              Iwrite Pioneer
              Excellent points.

              Now, speaking or workshops are different. If you have employees or contract workers, how many of these free jobs can you ask them to do? I enjoy what I do, but it is not fair or good business to ask art directors and photographers to continuously cut their rates. You can't do that with hourly employees or contract workers. Well, you can if you are going to pay them out of your pocket.

              Granted there are a couple of people here who offer services for free because they can. I'm not talking to them. I see people advertising how cheaply they can produce websites as a regular price, that is different from what you are doing. You are saying, this is my regular price but in certain instances I am willing to lower it. You are not advertising that you will come and speak or hold a training session for a fraction of what you know it should cost.

              I agree that it is important to work and develop relationships but sometimes being the lowest price does more damage than good to your image. The folks I am saying "STOP IT!" to know that they are charging too little.

              But let's keep talking about this...
                • Re: Are you cheapening your way out of business?
                  Lighthouse24 Ranger

                  In my case (and most others, I think) overhead costs (facilities, utilities, insurance, employee wages and salaries, benefits, etc.) are the same whether revenue is generated on a given day or not. So again, working (and generating some revenue) beats not working. Yes, variable costs like contract labor are different, but they're budgeted and managed as a project expense (contractors don't get hired in the first place unless there is work to do that generates more revenue than they cost).

                  As for the web developers offering cheap or inexpensive websites (noted in your last post), I've always assumed that that's just the business model they're operating on - sort of the way an M&E service firm does free inspections on home heating and air systems. After all, it isn't all that difficult to to build a basic website -- so they are giving away something that doesn't really cost them much, yet has value to the client and may lead to more business later. Makes sense to me.


                  Perhaps I'm still not understanding exactly who you're talking to, however. If that's the case, I do apologize for missing the point.
                    • Re: Are you cheapening your way out of business?
                      Iwrite Pioneer
                      If all I am doing is supplying you with a template and not witting copy, sure I can give you a website. However, if I am designing you a website that helps to drive business, allows for e-commerce and builds the brand, that I cannot do for free. It should require more than one person because there are at least two different jobs being performed. In cases like this, I can't do it for free because I have to include the cost of the other person(s). To your point, anyone needed for a project that is not on staff has to be willing to work for free in your example, that's cool if it is only me, but I work in a team. The overhead may be set but revenue has to be generated to keep things going.

                      Also, I have worked with enough clients (up to Fortune 500's) who try to get something for nothing, and never repay the "favor." The advertising industry has wrestled with this issue when it comes to providing spec work to pitch clients, the costs to pitching a client can reach into the tens of thousands of dollars. How many small businesses can afford to spend that kind of money on something that may or may not generate income? Not many.

                      I am saying there are those here who are underselling their services not as an exception but as a rule, and they are making it harder on themselves. It doesn't affect me because my clients tend to be bigger, but if you are scrambling to keep your business afloat perhaps, one area you may want to consider is how you have priced your product or service.

                      I think we are closer on this than it sounds. I am concerned that folks are not charging enough for what they are offering.
                • Re: Are you cheapening your way out of business?
                  iventures Adventurer
                  I hear the constant complaint - business is tough today due to the economic slowdown. But sadly too many contractors attempt to compete in that environment by cutting back. For example, they cut back on overhead - job supervision - to keep costs down in order to compete on price. Or they go after subcontractors who are lower cost even though this may sacrifice quality.


                  This may appear to be the only choice because after all bid prices are dropping. But this is like shooting yourself in the foot! You will lose a step and wonder why you can't compete after the slowdown is over. After 9/11 the airlines tried the same thing - they cut back on services to save money - and people decided to drive instead of fly because of the hassle. Of course, if you are going across country you will still fly - but the distance that most people are willing to drive has increased. In construction - it's no different. Make the experience so unpleasant and customers may put off building until they are forced to build - which won't happen until after the slowdown is over which makes the slowdown worse.


                  Instead increase services. Find ways to add value to the client. For example, increase your warranty from 1 year to 5 years. Learn what extra services you can provide the prospect that no one else is providing. Keep in mind, the prospect may have cut back its staff - so they can't do things they use to be able to do in-house. In other words - get creative. *Stop complaining about the economy! *
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