In my opinion, one of the most consistent hot-button issues when working with vendors is price. I’ve personally seen it more times than I care to think about in my life on both sides of the marketing communications table. I’ve asked the question to dozens of firms and I’ve answered the question from dozens of clients. So believe me, neither side has it easy.
As the client, you’re struggling between “good enough†which has an element of speed; and “best available†which is all about being seen as #1. Don’t forget your finance guy that’s happy with “the cheapest”.
You get this feeling deep in the pit of your stomach as you’re watching the agency go through their pitch. You know that they would work hard for you. You know they would bring all of their world-class expertise to bear on your project. You’re thinking, “they know the industry, they know my business, we get along and their work is top notchâ€Â. It’s exactly what you’re looking for. But you have a feeling they’re going to be outside of your budget or at least outside of your idea of what their services should cost. You hate to bring it up because you know that budget shouldn’t be the ultimate deciding factor on what solves your problem or need. Sure there are cheaper firms out there, but these guys have it all and they’re right here in front of you.
From the agency side, when you are pitching, you can see it in their eyes. During the discussion and demo, the client’s eyes light up. They ask the right questions. They understand what you’re about. But there’s a hesitation, a slight glint of uncertainty. You know that sooner or later you’re going to get the price question. Charging by the hour isn’t really an option because clients demand to know at least a range of prices to consider before signing the dotted line. Charging by the project, or value pricing, is a strange magical mix of time, hourly rate to cover overhead, and some profit padding based on you think the market will bear. Either way you sense there is going to be sticker shock.
In my experience, this scenario happens most often when agencies are presenting to “budget spenders” not “budget deciders”. Budget spenders are only worried about their bucket of money being spent efficiently. They are more concerned with waste than return. Solving greater business concerns are typically second or third on the list. If you’re on the client side and this firm provides the solution you need, then move them up the chain if you cannot make or justify the decision yourself. Become their biggest proponent. Get them in front of the true budget decider. She/he can find the money required to solve problems. Your foresight and problem-solving abilities will be recognized and rewarded. Unless you truly do not have the money available, price is rarely a reason not to buy.
Back to the agencies; if you cannot get past the price question, one of two things is happening. You’re either not working with the right people (“budget decider” versus “spender”) or you’re not providing enough value to the clients and the price objection is an easy way to say no and move on to another agency with better relationships and/or better offerings and value.
Price is rarely a true deciding factor – unless they really do not have the money available. People buy what they want before they buy what they need. They buy emotionally first, then support their decision with logic and facts.
Nick Rice
Cre8tive Group
Strategic Design
This is a tough one to comment on Nick. A lot of times it boils down to “other people’s money”. If the firm is large enough and you’re not talking to the owner but a buyer, then they may be more willing to value results over budget. After all, “it’s not their money”.
If you are talking with small business owners who are doer/sellers then they sweated for every dime they possess. Depending on how savy they are with regards to marketing will you benefit with an opportunity. If they are number crunchers then they will view marketing as an expense not an investment. They are concerned only with saving money – how little can I spend. They don’t or can’t recognize a great solution because they are mired in a desire to save, or get as much as they can for as little as they can.
If you’re lucky enough to find a client who understands that great marketing can make them money, they don’t fit the ‘pearls for swine’ model. But regardless, I was always advised that if I wanted to follow some basis for success, try your best to get clients with decision makers who are “spending other people’s money”.
To be honest I don’t follow this model as a rule, but my ears perk up when I see it happening. Mostly, I’m looking for clients who have the guts to play outside of the sandbox. The ones who respect budgets and creativity but not in that order.
Lastly, I believe we must all be responsible. There is nothing more rewarding than a client who believes that they will absolutely profit from the solutions I provide them.
Ed
Great article although I have to disagree that price is only rarely a deciding factor (or maybe I am just constantly targeting the wrong audience). More often then not, price is the ONLY factor (especially when working with small businesses). We’ve recently realized a way to deal with this is offer some kind of financing.
Zach, I do have to admit to laughing a little bit when I saw your comment – only because I’ve been there. It depends on your offering. Obviously there are some commodities that are solely price-driven. I’m thinking of napkins, old-fashion #2 pencils and the like.
If you’re offering any type of professional service, I’m afraid you’re probably right, you’re targeting the wrong audience OR you’re not differentiating yourself from your competition. If your audience doesn’t see your offering as different and valuable, you will be automatically regulated to a low price war because there is nothing else to compare.
You don’t want to win a race to the bottom.
Hi Nick,
I enjoyed reading your article. I had a strange problem recently on the opposite end of your experience. Our company offered an all-expenses-paid trip to past customers as part of a contest. When it came time to pick a winner, we had a hard time getting someone to agree to take it! Because we were giving the conference away for free, most people couldn’t believe it was worth going to.
The lesson we learned is that trying to avoid ‘sticker shock’ by making products (or services) available for the lowest price can backfire if it devalues your offering.
You forgot to mention one last scenario. ‘Budget Spenders’  when overzealously focused on their upward mobility  will do their best to prevent contact with ‘Budget Deciders’. At which point the vendor must create a risky ‘go-around’ strategy or lower their price.