Pricing for a ‘Daily-Rater’: Some Issues And Solutions
Yet again I’ve been asked by a client to show some flexibility on my price (i.e. reduce it!) so I thought I’d relate my own approach to this whole area. I hope you find it interesting and I’m really looking forward to hearing your comments on how you’ve dealt with similar situations.
First a bit of background:
I’m a business researcher. Among other things, I carry out feasibility studies for start-up or developing businesses: sizing their markets, identifying important trends, doing competitive analysis and the like. Typically my projects are one-off and usually require between 3 and 10 days’ work.
Be prepared for the ‘second ask’
I’ve been asked to provide a good price on a project for a client (whom I know very well). I’ve kept my days pared back to an absolute minimum, and as a result they’ll be getting a helluva lot of research for their money. The proposal has gone in and they’ve come back with the second ask: looking for a reduction on my daily rate.
I now realise I should have kept my number of days more realistic at the start, so that giving a small reduction on the daily rate would be more feasible. Next time I’ll try to be ready for this: if I’m asked for a good rate the first proposal should go in as completely standard with an offer to ‘do something’ if it’s over budget. We live and learn.
This is a very dangerous situation to be in, especially in these difficult economic times. Of course giving a freebie in many cases devalues our image and reduces the value that the client places on our service. But in some cases it can work. For example, I have one client who works in a cash strapped sector. But the fact that she’s one of my few repeat clients means that she’s very high on my list of valued customers (the vast majority of my projects are one-off, with little scope even for referrals due to the nature of my business).
On two occasions this client has approached me with a small project, saying: “I have zero budget for this but I really need your help”, and I’ve stepped up to the mark. However, I trust this person to treat me properly, and this trust has been well placed to date, as the client has returned again and again with fully budgeted projects. So a well-placed freebie can be a good thing.
Be generous with time
It’s a rare project that doesn’t have some level of follow up discussion or refinement. This often ends up with additional work, but not very much of it. I try to factor a little of this time into my pricing as a cost of sale. Just as working on a very comprehensive proposal can take hours, before the project, so too can fine tuning the research a little after it’s been delivered. I think when you’re talking about 5-7 day’s research; the least a small business can expect is a little bit of added time, where it’s justified. I’m happy to provide this, in the interests of delivering a top class result for them and in the interests of a good client testimonial. Having said this, any change in the brief/proposal must incur an extra cost, and I’m sure to include this warning in my proposal terms, every time. A few hours extra is ok, but changing the goal posts is not acceptable.
Proposals can always be reduced
If a client balks at a price it’s worth taking a step back. All of my proposals are written with the best possible result for the client in mind. But in a case where they simply can’t afford the associated price, then taking a piece out here and there can often do little to harm the end result.
First proposal is an ideal scenario project: second proposal can be best case scenario given the budget. A research project is composed of many elements, and shrinking these will almost always still result in a really valuable output. I’ve just recently started to use this approach. Instead of being an all or nothing proposal, it’s a first step in a process to getting the result for the client that they can afford, and that will still make the project very worthwhile for them. It’s logical, and it’s simple: but getting this across to the client can sometimes be difficult.
I’ve been in business for over ten years, and these changing times do bring new challenges. What pricing issues have you been faced with and how have you overcome them? Have you any suggestions for how to improve my approach?