Why Lowering Your Prices WON’T Make You More Competitive

September 17, 2012
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It’s no secret that times are tough. The recession has hit everyone hard and everyone is looking to save money where they can. For business to business industries like graphic design this can be a real problem as design is considered by many (rather unwisely) not to be an essential component of business and is often one of the first places business are looking to save money. Just switch on the television if you need proof, and count how many of the adverts you’re seeing are repeats dug out from years gone by.

Seems like a good idea…

Surely the only way to be competitive is to offer comparable rates?

With everyone seemingly looking for the very best deal they can find, it might seem only natural to think that lowering your prices is the only way to keep from going under. A lot of design work is being taken overseas to eastern countries with lower cost of living rates that can do the same work for much less, so surely the only way to be competitive is to offer comparable rates?

How you hope your clients will see it

If you did decide to drop your rates you have think about how your clients, old and new would see the change in pricing. No doubt you hope your current client list would see it as a favour. As a recognition that purse strings are tight and that you’re looking out for them and their best interests. New clients would look at you and realise that you’re offering outstanding value for what you’re charging and that they’re incredibly lucky to have found a real professional at such low rates.

How your clients will actually see it

The message you’re really sending is that you’re struggling

In reality however this is often far from the truth. The real message you’re sending is not one of understanding and helpfulness. The message you’re really sending is that you’re struggling. You’re telling your current clients that you can’t keep your head above water and that you’re either not getting enough work in, or that you’re not very good at what you do. In either case you now have your current clients wondering if they’re making a mistake by staying with you. They may well be happy with the work that you’re doing for them, but if you’re lowering your prices then that means that your other clients aren’t happy, so maybe they know something this client doesn’t?

Likewise new clients will look at you and see a company just getting it’s feet wet and looking to get a foot hold in the industry with it’s low rates. Once they see that your portfolio is extensive and that you’ve been working as a designer for several years alarm bells will begin ringing as to why you’re so cheap? The work looks good, so maybe you’re really slow? Or perhaps you have problems sticking to briefs? Is it really worth them taking the risk on you when something is so obviously wrong?

Moving forward?

Even if you do survive you’re drop in prices, what does that mean for the future of your business? Raising your rates is a very slow process done over several years, so even after we come out of the recession it may still be years before you’ve earned up the trust to get back to where you were. Your old clients will be upset that the trust and commitment they showed you in the hard times isn’t being repaid and some of your newer clients will no doubt be upset with paying more for the same level of work that they were receiving to begin with.

What you should do

It’s a difficult thing to get your head around, but what you need to do is stay the course. The companies that are seeing the most success throughout this recession are the ones that have kept their footing and in some cases even raised their prices. It may seem counter intuitive, but the message you’re sending out by sticking to your rates is that you strongly believe that this is what your work is worth, and that is what your clients will think too.

You strongly believe that this is what your work is worth, and that is what your clients will think too.

Think about it this way, if Apple needed a designer, would they look for the best deal out there? Not on your life. That’s because to them, quality is everything and they are absolutely willing to pay for it in order to keep their brand where it belongs. There will always be clients out there who want the very best, and whether it’s right or wrong, one of the key ways they will judge who is the best is who charges the most. If you’re rates are low, it doesn’t matter how good you are, the big clients that still have the money needed to grow your business will not even look at you twice.

If you have any advice or an experience you’ve had with changing your rates, I’ve love to hear about it. I realise that rules like this aren’t hard and fast and that there can always be exceptions, so if you’ve had a positive or negative experience from changing your rates, let me know in the comments below.

Photo Credit to giveawayboy

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is owner of Hunting Town Design, a small design house based in Manchester UK specialising in Graphic Design and Illustration. Alex is also the founder and editor of The Design Range. Find out more about Alex on his website or follow him on twitter.
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