Common Mistakes: Lowering Your Prices to Get a Job
March 11, 2010
This is perhaps the mother of all mistakes I made years ago. And, if I had written this same entry two years ago, I would have definitely advised you to NEVER lower your prices to get a job. However, because of the dire place of the economy in the past year, I have learned to have a different point of view on this matter.
Years ago when I first started, I kept lowering my prices to get a job. I did it over and over again, until I realized that I was actually losing money, not even breaking even. So here it is: if you find yourself in the position of lowering your prices to get a job and you are still able to make a profit –then BRAVO.
Here are different examples of common price structures:
1) Flat fee. If you charge a flat fee for your services and lower it, this could be a place you get hit hard. Most likely you have a hard time explaining the value of your services to your clients. Explore ways you can be more effective in your presentation and your sales pitch.
2) Charging by the hour for your services. Also another place you might get hit hard if you lower your fees. (Same reason as above.)
3) Mark-up system. This could be the most damaging one. If you lower your prices, either your product is going to suffer or you are going to make less profit and lose money.
4) Creating a package. This could be the least dangerous one if you manage to sell it properly.
I also think the economy’s downfall has created a mentality in me and most clients (really, the overall culture) where we’ve started believing that we actually DO NOT NEED TO PAY FULL PRICE FOR ANYTHING (I tried asking for a discount for a Gucci shirt at a store and they laughed at me).
Be wary of the following statements:
- “These are difficult times and I can get cheaper prices from your competitor.” (Most likely they are saying the same thing to your competitors.)
- “I want it to be beautiful, but I don’t want it to look like I am spending a lot of money.” (This is a reasonable request as long as they are paying for whatever they are getting.)
If you lower your prices to get a job, and you can actually do it without jeopardizing the quality of your work, go ahead. In my opinion I find that next to impossible so I strongly recommend against it.
What do you think? Let me know.