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Business Observer Friday, Feb. 8, 2008 14 years ago

LASDAY: Your price is too high

In an era of low confidence and limited budgets, the mantra calls for "full service" at "lower price".


Your price is too high

by Lou Lasday

In an era of low confidence and limited budgets, the mantra calls for "full service" at "lower price".

If you're a Gulf Coast professional service executive - attorney, community banker, insurance broker, commercial realtor, developer, financial planner, accountant, architect, software developer or one of the dozen categories that basically get "fee for service", your pricing structure is under attack!

In today's economy with customer confidence low and business budgets under scrutiny, your clients are looking to spend less, while getting your full service.

At home, the consumer is experiencing a kind of downward mobility. Even families with healthy incomes seem strapped for cash. They are afraid to spend big money for professional services and, in too many cases, are worried about keeping their homes and jobs.

At the office, the business buyer has a benign budget. Increases are just not there. Even trusted commercial suppliers on their corporate books for years are being challenged. Sadly, it seems that fewer and fewer existing clients are locked in to you.

You'll find that your long term corporate clients, with their internal changes in purchasing, may be putting more pressure on you to reduce costs. In situations where acceptance of your price would have been routine, now clients are seeking competitive bids or even competitive interviews in rethinking their entire process.

The interesting thing is they don't really want to sacrifice quality or take the risk of dealing with unproven vendors to accomplish these cost savings.

Their obvious intent is not necessarily to switch service providers but to get you, their preferred service vendor, to feel as if your client has many options and would go elsewhere if necessary.

Because of this rather strange economy, many service providers are more flexible and end up working for lower rates and fees; or, doing just a little more for the same old rate.

Don't get angry

Become less emotional. It's not personal. Regard this new economy as an opportunity rather than a problem - an opportunity to help the client meet a particular need in a cost effective manner. And maybe even for you to sell more.

Personally, I've always liked to back into the discussion of costs by asking the client if he has an existing budget and then starting the discussion with what I can provide within the confines of that budget. Then I would quickly add something like: "We can get started with that and here's what I'd like to accomplish for you when additional funds are available." The object is of course to have the client do a little more up front. A sincere discussion will usually produce dramatic results.

The reverse is also true. The best way to lower your price after submission is to intelligently reduce the scope of your service to meet the reduction in funds. This makes the job affordable for the client, gives you the usual profit you need, keeps your credibility high, makes the client appreciate your flexibility and is a reasonable, sensible method the client can understand.

Removable options are also a good way to allow the client to choose his own level of cost. For example, a commercial realtor or developer might submit a construction estimate that says in part, "eliminate skylights (4): subtract $3,200" and "substitute carpet for wood flooring: subtract $2,200". Options create more involvement and that leads to trust.

Time is money

Assume you're an attorney and your proposal breaks down the number of hours, times your hourly rate of $250.00. You give the estimate. The client gasps! You discuss the potential dramatic savings to his tax bill with your strategy. If a court settlement is involved, you legitimately discuss devoting the hours necessary to make him win big! Unfortunately, the client looks grim!

You could certainly say, "If you provide me with copies of all the requested file documents at one time that would be helpful in keeping contact hours down. And, let me involve my legal assistant to do follow-up work with you for more savings. Her rate is significantly less. But understand please, you do want me to spearhead and be on top of everything. I promise my entire team will spend the hours wisely to make you proud of our relationship together."

More simply stated, in any profession: "Let's sit down and see if we can work out an arrangement that falls within your budget and still allows us a fair measure of compensation to cover our services. We really want to be of help."

At my own marketing firm, I always liked to break down costs to their lowest unit price. For example, if a 25-thousand full color brochure print run cost the client $25,000 last year and I now wanted to suggest a 50-thousand print rerun to cost $36,000 (both situations have a normal percentage markup), I could legitimately minimize the higher charge. I'd simply say, "Let's print enough for an 18 month usage instead of 12-months. That way, while naturally the total cost is more, the savings on unit costs is significant and drops from $1.00 per unit to just 72 cents per unit. I'll handle free storage with the printer and have the job invoiced equally in the fourth quarter this year and the first quarter of next year." Now that's full service!

In the final analysis, it is you who does the actual work, or at the very least, guarantees its satisfactory completion. Be strong and be professional. Just continue to do everything humanly possible to deliver more than you promise. Stay in contact during the assignment and beyond. Your positive attitude, sincere assurances and high performance entitles you to your normal reasonable profit.

Lou Lasday is a corporate marketing advisor residing on Longboat Key. He has been a general partner of an Ad Age Top 100 marketing communications firm and regional president of the American Marketing Association. He can be reached at [email protected]

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