DON’T get discouraged –
Agency owners often get discouraged by being knocked back on price. If your instant reaction when a prospect rejects you because “you are too expensive” is to drop your prices, then that’s nearly ALWAYS a bad approach. Just because you are too expensive for them doesn’t mean you are too expensive for everyone. And if you are not being occasionally rejected on price then you are too cheap. If you are too cheap then you attract the wrong clients and make it much harder to make the profit that you need.
‘I know, why don’t I price on time, as that will get me an income that I can make profitable… right?’
Wrong! When you base your price on time you limit your ability to make significant margins. Price based on outcomes drive efficiency to give you the ability to control your own margins.
‘Ok so maybe pricing on time isn’t a good idea, why don’t I just do what my competitors are doing?’
The right price for your work is definitely not the price that other agencies are charging. Every business is unique and if you find something that differentiates your agency and delivers deep value to your chosen audience, then you create the right to charge accordingly.
‘Well if I can’t price on time… and it isn’t a good idea to match what my competitors are doing… then the only thing left to do is to find more clients and charge the same price…’
Charging a higher price means fewer clients and less work, so whilst it sounds difficult to charge a price that alienates most potential customers, it’s a lot easier than trying to serve them all! You get the dream clients that you want and avoid (or lose) those that don’t value your service.
Whilst there are lots of tactics that you can use in your pricing, there is one fundamental rule that gives them all a much higher chance of succeeding.
If you have the same person pricing jobs as you do managing the client relationships (i.e. Account Manager), you will always have a problem. An Account Manager’s job is to please the client, which usually means becoming a “Yes man”. If the client wants a deal they are more likely to say yes, be it a discount or extra work for free. You should set the price rates and the scope of work, then the account managers sell that scope at that price.