March 29, 2024
Donna: Hello and welcome to Design and Prosper episode 130. Today we are talking about pricing, in particular, low pricing. While it can be tempting to charge lower prices for your design services, especially when you’re just starting out, there can be negative consequences for you, your client and the industry at large. Let’s chat about this.
[Intro Music]
Kris: Hey everybody.
Donna Hello.
Kris: Hi, so today we’re talking about low pricing and the consequences of it.
Donna: Yeah
Kris: Because you might not realize that even though it’s very tempting, especially when you’re starting out to charge low, there can be negative consequences for your business. And for your client, for the results they’re getting, there’s, there’s no benefit. Really, there’s no benefit to charging lower. And we want to really unpack it for you.
Donna: Yeah, absolutely. And the consequences could be immediate or long term, or both. So the consequences might not hit for a little while, and then it’ll be like, oh my gosh, the ramification from that decision made a year ago is really going to be impacting.
And especially for your business, the consequences can be ongoing. You might find it really, really tricky to to turn some of these consequences around. So we’re going to get into those in a little bit, but before we do, let’s just have a chat about why designers are likely to charge too low. There’s a, there’s a few reasons as to why this might be happening.
Kris: See if you resonate with any of these.
Donna: Yeah,
Kris: YRight. So the first one is lack of confidence. So you just are underestimating. Not only your abilities, but also the value that you bring to the world as a designer.
Donna: Yeah, we forget about the value a lot. a lot of first time or first time in their business designers, they forget about the value they are offering, they are so excited by what they’re doing
Kris: They just don’t realize the value.
Donna: They don’t realise the value. And we have got some incredible training, our premium pricing training, which is completely free. If you go and grab that, if you haven’t already listened to it and had a look at it, it actually outlines all the value, so much value.
And you’ll have that at your fingertips. It’s free head to our website designandprosper.co/premiumpricing and listen to it today because that will give you lots and lots of ideas around the value.
Kris: it will help you with your messaging. And also understanding in your mind, the incredible value that you provide as a designer and how you help to grow clients businesses.
And it has so many flow on effects, so much positive impact that designers provide to the world. And yeah, you might not realize it. So, and even if you’ve watched the premium pricing training before we recommend you revisit it. because it is something that you forget. And it’s like, okay, I need a refresh of this. So you might’ve watched it six months ago. Watch it again.
Donna: Yeah, yeah. And then start to sprinkle some of that terminology into your messaging where clients are actually reading about the value and understanding the transformation that you are offering, which leads to the ability for you to charge premium pricing.
Because they trust that the results that they’re going to get with you as a designer are high end, and they’re going to be incredibly transformative for their business. That’s what they want. They want to know what’s in it for me. Where’s the value? And you can express and convey that value throughout all of your messaging. So yeah, head to our premium pricing and, definitely revisit if you’ve already seen it.
Kris: So, another reason why you might be charging too low is you might be fearful of losing clients or fearful of not converting clients that you’re quoting on.
So you’re like, okay, I know what I’ll do. I’m going to undercut. I’m going to really charge, uh, in a competitive, really cost effective way so that they have no choice but to go with me. So this is a trap. This really is a trap. Because you think, I’ve just got to secure these clients. But it can lead to you just being super busy and miserable.
Donna: Absolutely. It really is a trap. I love that you’ve used that word because when we’re, when we’re doing this, and, and it can happen. Just because a client suggests that they’re on a bit of a budget, or it could be because there is, that they’re getting a couple of quotes, and so you’re like, you’re terrified that they’ll go with another design, or you’re terrified that they’ll say no to your proposal, and you just need the money to come through the door.
And so, we get really, really worried when that happens. Triggers designers cutting their prices, going, I just want that client, I want to lend that client. And then they get the client at a cheaper rate, but they’re still delivering the, the full service, but the full service has been cut in half or, or, or whatever the price is.
The price cut is, but you’re still taking yourself out of your, your own game. You’re still taking yourself out of your business to meet the needs of that client who are only paying you a teeny tiny bit of money and the flow on effect of that is just catastrophic for a small business or any business.
Kris: Yes. Another thing is just misunderstanding project costs and business costs. You just might not fully appreciate what goes into a design project, especially if you’re just starting out. And the amount of work that it takes to service a client properly and all the software that you need and the subscriptions and the equipment costs and the taxes. We might be like, Oh, that sounds like a good rate, but you haven’t considered the running costs of a business, which as a business owner, you really need to be across.
It’s really important that that’s part of your systems. Yeah, so that can definitely lead to underpricing. We actually recently did a podcast episode Check out 127, which is the things that are missing from your cost estimates. Yeah. To really understand, and that’s not business expenses, that’s just from your cost estimate. The time that you’re allocating.
Donna: I was about to say, there is so much time not being allocated as well as those business expenses. There’s so much time not being allocated, which means there is so much money being left on the table where you are not charging for part of the service, multiple facets of a service potentially, that you’re delivering on. You’re doing it and you’re just absorbing it. You’re absorbing that cost, you’re absorbing the next thing and the next thing and the next thing, and before you know it, you’re pretty much working for free.
Kris: or five dollars per hour.
Donna: Yeah, so be very, very careful,
Kris: and that’s another thing, you need a system for tracking how long well, what you’re actually getting at the end of the day. What is your hourly rate with your business, everybody?
Donna: Yeah. And look, all of the things that we have been talking about, even in this short amount of time, we cover inside The Academy.
Honestly, for those designers out there who are just starting out in business, do yourself a favour. The Academy is amazing. The best starting point to set up all of the foundations from the get go to ensure that you can charge the right prices for your work that you are worthy of, that are offering value to your client and will provide you a sustainable, predictable business.
Honestly, once you get all of the things, even all the tips that we’re going to share with you today sorted. You will be able to be literally charging the amount of money that you need to be charging to be running the type of business that you want, especially if you want them to be running a high end design business.
So anyway, I couldn’t help myself. We’ve already we’ve spoken about so many resources that are inside the Academy. It’s just come on in. not in already, come on in. We love to help you out.
Kris: So another reason why you might be charging too low is you’re comparing to underpriced work.
So the comparison is not a good comparison. So you’re doing your research online and you’re seeing these prices out there and they might be other people who are undercharging, or it might be just up work or it might be people who are based in completely different area to you, geographically, a different country. It needs to be a match to your situation so that you can earn a good living.
Donna: Yeah, absolutely.
Kris: Another thing that happens is people compare to freelance rates. or actual employment rates per hour. So you’ve got a design studio who’s employing designers, that’s not your rate. Your rate shouldn’t be anything like that.
That’s a completely different type of situation. you’re running a business. Your rates are a business rate.
Donna: Yeah. If you like, your rate should be a retail rate. And those rates that Kris was referring to are wholesale rates, right?
Kris: Yeah. Or employee rates.
Donna: So that’s just another distinction. So we don’t want to be at wholesale rates. We want to be at recommended retail rates, if you like. industry standard rates, they’re your rates. Yeah.
Kris: Yeah. Because I think that if you’re looking up freelancer rates, freelancers, uh, by our definition, people who design for other design studios, sometimes they’re white labeled. Sometimes It would be, you know, you as a designer designing for other design studios.
And So of course you don’t have the overheads of running a design studio when you’re doing that. So you shouldn’t be comparing yourself to freelancer rates or wholesale rates like Donna mentioned. And we did an episode on this drop the dirty f word about freelancer, just on the topic of freelancing. That was while ago.
Donna: Yeah, yeah,
Kris: Still very, very relevant. It was episode 37. If you’re looking for that one, we prefer not to use the word freelancer when when you’re running business. And some of you are calling yourself freelancers and you’re actually running a design business.
Donna: Yeah, and we want you to stop that straight away. Please do go and listen to that episode. It is so relevant. Yes, it was a long time ago. I was just reminiscing then. That was one of the most important things that we wanted to say back when we started the podcast. So I think it was, what did you say, Kris, 37?
Kris: 37 yeah,
Donna: it’s important because it really does shift the understanding of who you are to the, to the people that you work with. It takes you from that employee mindset. It takes you away from the employee mindset to a business owner and you are consulting business to business. That distinction in itself commands and attracts higher pricing. So we want you to make that distinction. And if you’ve got an email signature out there and it says freelancer and you are running a design business, please do yourself a favor today, go and change your signature to founder or owner or designer of your director. There you go. CEO, whatever you’d like it to be, could even just be boss. What, whatever you want it to be. But it is that single act. Helps to attract higher prices because people then know they are dealing with a business and not an external employee. Really important stuff.
Kris: Yeah. Another thing that might be happening is you’re actually getting active pressure from clients to quote
Donna: This happened a lot with us. have to navigate conversations with confidence all the time about value. It doesn’t go away. They really do try it on.
Kris: Especially with an uneducated client or an inexperienced client might be somebody who’s new to business and they just don’t understand the value of design. So once again, it’s about your messaging and promoting the value that you offer.
And also you know, if you’re really feeling pressured and you’re, you don’t have a lot of experience, it’s going to take a fair bit of to to speak up for yourself and, and position yourself correctly as well.
Donna: And even with really spot on messaging, if you’re in a bit of an economic downturn like we are at the moment, clients will still want to have things done at a lower rate and the pressure will be there because it’s globally there. So you’ll still have to access that confidence to have those conversations even in trying times like this. A lot of the time clients will just try it on. They’ll just try you out.
Kris: They will!
Donna: Any chance that this can, you know, happen in this way or for this amount of money or whatever. So just stay, stay firmly in your lane and yeah.
Kris: Yeah, there’s personalities and cultures who they always ask. That’s just part of who they are.
Donna: Yeah, they know the values there, but they’re, but they’re gonna try it on. Yeah.
Kris: Yeah. That’s part of their process. They just got to ask. You got to ask, right? And you can say no, you just got to say no. Right?
Donna: You have full permission to say no, right? Exactly.
Kris: Yeah. So let’s get into the consequences
Donna: Yes. Okay. So this is where it’s at, really. And these can be immediate, like I said, short term or long term. The consequences can run deep, so, and they can run far and wide and affect industry standards at large. So, might be singular consequence, but it also might really scatter out to affect so many people simply by charging low prices. It’s powerful. It’s powerful stuff. The impact that it can have on yourself, your clients and the industry. It’s crazy, really.
Kris: so the first consequence we want to talk about is attracting the wrong clients. You know what low prices are going to attract, right? What kind of client are you going to get who is attracted by low prices.
Donna: Yes, exactly.
Kris: Difficult clients!
Donna: Red flaggers!
Kris: Yes! They don’t see the value. They’re going to try and push the scope. They’re going to be demanding. They’re going to be be difficult to work for.
Donna: They are going to want blood, Kris!
Kris: Yes!
Donna: And that’s the thing. It really is incredible. The difference in the mindset to high end design process meets high end price versus high end design process that meets low price. They do not see the value. They’ll take it anyway, but they’ll, literally take you through turmoil as well. So it really is important. You don’t want to be attracting that personality type at all.
Kris: Yeah because when you, when you set low rates you’re gonna have people who they’re just prioritizing budget over quality, over service. They’re going to have unrealistic expectations. They’re going to micromanage.
Don: Yeah.
Kris: They really will. I’m just, I’m pointing here
Donna: Yeah, she’s, she’s pointing at me! Haha. Kris is serious!
Kris: we’ve been here. We’ve had these clients and they are motivated by the wrong things.
Donna: I think we’ve all had these clients at the very beginnings of our business and we just have to, that’s why we exist, beautiful people out there. Kris and I want to really fast track you away from this. In the early instances of our business, we, we, we would have put up with a whole heap of things and that, that’s part of where our wealth of knowledge comes from having experience. That’s why Kris got the pointy finger out. They will micromanage. She knows she’s experienced it. So we want you to know from the get go, draw that line in the sand. Don’t go there. It’s not, it’s not fruitful for yourself at all.
Kris: Another consequence is you’ll attract not only non ideal clients or problematic clients, you’ll attract non ideal projects because you’re positioning yourself on low price. Well, then you’re going to get every kind of project that’s not strategically aligned to your business in any way.
You haven’t really considered who your ideal audience is if you’re just focused on low price So that it’s not going to be aligned to what lights you up It’s not going to be aligned to a niche or your skills or your interests, it’s just going to be something that’s it’s going to be a misalignment.
And you know what happens next is you’re going to get frustrated, you’re going to get burnt out, and you’re going to have, you’re going to have difficulty showcasing your true potential. And then, you know, you’re going to have less case studies that you want to share, and you’ll have less portfolio pieces that you want to share.
Donna: You’ll become invisible because you won’t want to show that rubbish. Yeah. Like, at the end of the day, let’s just get real with it. It’ll be work that you’re not proud of. So, it’ll be like, I’m not going to share that, I’m not going to show that. So, low pricing is the key. Absolutely not ideal or strategic for your positioning in the market at all, because you can’t position yourself.
You don’t want to put it out there. You’re not proud of the work and you’re attracting really difficult situations that are just problematic. in all sorts of areas and really damaging to your business ecosystem. Because the cycle is really damaging because you can’t show this work to get the right people.
So you’re constantly accepting poor work or compromised work through the door all the time because it’s all, all that’s coming in because you’re not able to put yourself out there. Your positioning is not right.
Kris: So the next one is low rates will send the message that your services are not valuable. So just say you have some good messaging and you’ve attracted some clients and you’ve gone through a really good process with them and then it comes to pricing and you’re really low, right, just because you’ve got fear and you’re not confident even though you’ve worked on your messaging and all that sort of thing.
What message does it now send to your clients clients? That you’re actually not valuable?
Donna: Exactly. That’s right. And it’s a bigger bridge to cross to really educate. Once you’ve done the damage, it really is the done the damage, it really is, the consequence is there now, right? Yeah, I was off on um, there’s a psychological factor here. Yeah. I was off on another tangent there, Kris. I think the way that I was thought you were saying is that you get it together, you’ve been charging low, and now all of a sudden you wanna charge high.
And so yes to, to everything you’ve been saying as well, but. But when, when you do that, when you realize I’ve been charging too low, I’ll get my messaging right. I’ll now, I’ll now charge what I’m worth. Clients who have been paying you at a low rate won’t want to pay the higher rate because I’m so, I’m used to paying that lower rate.
And it’s a big bridge, as I was saying before, to, to, you know, to cross.
Kris: cross,
Yeah,
Donna: to get
Kris: low, if you start low, it’s so hard to climb up to where you need to be. Because you’re just so fearful of losing those existing clients who’ve been used to paying low,
Donna: that’s right. You limit your growth potential. Like you were saying, so I was off on another tangent. Sorry, peeps.
Kris: it was a good tangent, so I didn’t, I didn’t want you to stop that tangent.
Donna: Oh, that’s good! But going back to your point, so circling back they’re not going to see the value, absolutely.
They’ll be like, hmm, I think your work looks amazing and it might be saying, your messaging might be saying all the right things and your work might look great. But if your prices are not a match to that beautiful high end work, they’re not going to see the value and want to work with you. you’re really cheap and that’s messing with yeah, that’s messing with my brain. Why are you so cheap? What’s wrong with you? There’s got to be something wrong.
Kris: Cause we did an episode recently about this where there’s a lot of psychology to pricing where for some reason, our funny little brains, we perceive things as more valuable if they’re higher priced. Right? So it’s like, you’ve just sort of undercut all that good work that you might’ve done with your messaging. And that was just an example, like your messaging might be off, you know, but if it is good messaging and then you get to the pricing part and you’re too low, you’re, you’re, going to to unravel all that good work.
Donna: Sabotage.
Kris: That’s it. That’s the word
Donna: Yeah. We don’t want to do that.
Kris: Then, another thing that’s going to happen is you’re just going to have, you’re going have financial strain. And, that’s pretty obvious, right? Low pricing is going to make it hard for you to live your life.
Donna: It’s that whole ecosystem, that, that vicious cycle that Kris and I talk about where you’re accepting projects with, low budgets, you get bogged down in the work, you can’t then promote, you don’t have any time to attract the clients that you want to attract. You have then no cash flow and panic and so you then do another project at a low budget that you don’t really want to do and the cycle starts again and that’s that vicious design cycle that we want you to get out of and we want you to be able to charge the right amount of money so that attract
Kris: Yeah, there’s a lot of resentment in If you’ve got financial strain and you’re really busy, oh gosh.
Donna: It’s just, it’s such a perpetual rollercoaster that you’re on and you, you end up doing low priced work all the time to, you’re chasing your tail because of that financial strain. And you can’t scale because you can’t afford to.
You’re so bogged down with all of this work that you’re doing at a, at a low rate that you can’t afford a VA or a junior designer or a senior designer or admin person.
Kris: You can’t invest in training, marketing, even professional development or even something like coaching, which is going to help you elevate because your profit margins are so low.
Donna: yeah,
Kris: so all of this stuff, all of these consequences are impacting you as a business, but also it undermines the industry at large.
Donna: So huge. Big point. We are absolute crusaders for the design industry across the globe to be charging sustainable pricing for their work. Elevated, value based pricing so that designers worldwide are being paid what they’re worthy of receiving.
Kris: Yeah, because if there’s a whole bunch of designers charging low rates because they’re unaware or they’re uneducated or they’re inexperienced, it just drags down the whole industry.
Donna: Yeah.
Kris: We want to uplevel the entire design industry. It’s a big mission!
Donna: it’s big mission, but we’re on it. We’re on that road and we come across so many people that we work with inside the academy and our one to one clients. And one of the common threads through conversations that we have all the time are how exciting it is.
That designers are now getting on the same page with charging the right amount of money for their work and it’s great. We’re seeing it happen little bit by little bit by little bit. We’re seeing designers charge what they are worth and communicate the value. We’re seeing that communication happening.
And, you know, again, if you are having trouble with that Come and talk to us. We would love to work with you because that is our mission to get everybody elevated in that way where their businesses are sustainable and predictable. And it starts with you. It starts with you making the right decisions for your business and charging the right rates for the work that you do. Honouring the value that you’re providing. It really does. It starts there.
Kris: It’s also not good for your clients and you might be thinking, Oh, really? How, how is that? Like they get a benefit because it’s really cheap, but you as a designer charging too low are going to be disgruntled, unhappy. You’re going to be overworked or, you’re going to cut corners to meet that budget. And so how are they going to get a good result with an unhappy disgruntled overworked designer or a designer who’s not actually doing the process properly? How are they going to get good results? So it it is not good for your clients either. So it’s not good for you, good for the industry at large and it’s not good for your client.
Donna: No, don’t do it beautiful designers and you’re so worthy. It’s, it’s, you’re so incredibly talented and you are capable of doing something that your client is not and it’s the reason that they are asking you to do the work that they’re doing. And don’t mistake the fact that this beautiful skill set that you have come so easily, so therefore it’s not valuable.
I see that a lot, where it’s like, oh, I did this thing, or I didn’t, oh yeah, I’m like, you’re so good at that. Oh yeah, I suppose so it comes easily, and so therefore it’s not really hard. That’s okay. That’s, that’s your secret source. That’s your gold and that needs to be paid for. And so we see that time and time again because the process comes easily to designers or creativity comes easily and they just have a flair and that beautiful vision and it all happens so easily.
They don’t realize that that, that pure talent is what clients can’t do. for themselves. And therefore that transformation that you are providing is so huge. And you are so worthy of fair pricing for that work that you’re producing. So please don’t undervalue yourself. Please don’t undercut and charge low prices for all of the reasons that we’ve explained today. It really is, you really are are just shooting yourself in the foot. You really are.
Kris: So if we’re speaking to you and you’re like, ah, hands up. I’m the person who’s been charging too low. There’s some things that you need to do because there are a lot of puzzle pieces that need to be in place, right? In order for you to feel confident to charge higher prices. So we have some freebies that We mentioned one of them before, the premium pricing training, that’s really important. Also download our free pricing guide to make sure you’re at least in alignment with that. Just head to designandprosper. co forward slash free. But something that you need to do, you need to do some work on who you’re targeting, who your target audience is, because like we said before, basing your business on cost on low, low pricing is not a great brand positioning.
Donna: Not at all
Kris: No. No. So you need to have a stronger foundation than that. So you need to really be clear on who you’re targeting. You might have a niche, for example so that you can really tailor all your messaging directly to them and position yourself as the expert within that area. And that will also help you focus on attracting the clients who actually value your expertise because they see you as an expert and they will be willing to pay premium prices because you’re the authority.
Donna: Yeah, absolutely.
Kris: So you really need to do some work on your messaging,
Donna: Yep.
Kris: Strong value based messaging.
Donna: And that’s not easy work. So, you know, strap yourself in and do the work because it’s essential and it really is going to be the catalyst for your abilities to charge premium pricing. will, it is everything. Messaging is everything.
Kris: We cover it in detail in the Design and Prosper Academy. It is so, so important to get that foundation right. It will make or break your business.
Donna: It will. A hundred percent.
Kris: Sometimes it’s been the major change that some of our clients and some of our Academy students have made, is just been their messaging. And it’s made all the difference, if you can Be super confident with your messaging and then that in turn will help you to become very confident with your whole sales approach.
Donna: Yeah.
Kris: When you’re messaging is good and you know who you are with certainty and you know who you’re servicing, when they hop on a discovery call, the confidence just shines through. You know what you’re talking about
Donna: and the value is undeniable yeah yeah
Kris: so just remember that charging fare rates benefits everybody the whole industry benefits you, benefits the clients and pricing low just drags everybody down the entire industry. It’s not sustainable
Donna: And it’s not just affecting your own business, but like Kris said, it’s potentially setting a precedent for unfair rates within the entire industry. Because clients will go, Ooh, but no, I can get it for this amount, or I can get it for that amount. If we start to elevate across the board, like we said, it’s a big mission, but we’re on it.
We want to see prices that are fair for designers and sustainable so that designers can have a really profitable business. Beautifully profitable, predictable businesses. That’s what it’s all about.
Kris: Otherwise the world just sees design as a commodity and not a high value service. And we don’t want to be a commodity
Donna: We don’t.
Kris: price matched, like going low, going cheap, you know, uh, don’t want We don’t want because we want everyone who is a designer to be really fairly. rewarded for their work financially. We want people to be able to have a sustainable income, you know, that them to maintain a beautiful life. Have that beautiful balance.
Donna: It’s all about why. That’s right.
Kris: To be able to to buy stuff.
Donna: Yeah. go on holidays and do whatever you want to do with your life. Take time out, Achieve your goals. your why, like why are you in business in the first place?
Kris: We want every designer to be able to deliver high quality work and that is very hard to do when you are pricing low.
Donna: Compromised. You’re compromised. You’re cutting corners. Yeah.
Kris: Yeah, and we want designers to be able to invest in their professional development as well, which is where we come in. You can come and we can help you to elevate and get to this level of confidence to be able to charge premium prices where it’s undeniable. It’s like, this is what it has to be.
Donna: Yeah. My business model yeah. This is why Yeah, yeah. And you’ll have clients after a discovery call saying, so when can you start? Haha. I want that. I want what you want what you are offering. How do I pay? hahah, know and you know, it’s all about maintaining that healthy work life balance, isn’t it?
And really being aware of your pricing. is really foundational to be able to achieve that because as we’ve outlined today there are so many factors that low pricing contribute to in your business including your mental health.
Kris: Yeah, lots of puzzle pieces in place like we need to make sure you’ve got a really strategic approach to getting those high quality clients. Yeah, it’s, it’s totally doable. You can have it. You can have it in your life yeah, Yeah, yeah. you can. Yes, you can. All right. Be brave, beautiful designers and charge what you are worth. Charge what the project is worth. You know, charge the value.
Donna: That’s it. it. But before we go, we just have one little favor to ask. If you are loving our podcast and loving what we are sharing with you, It would mean so much to us if you could subscribe and if you’re up for it, leave us a little review. If you love loving us.
Kris: Yes please!
Donna: It’s so important for the growth of our podcasts. It’s so important for us to be in as many ears as possible especially with our mission
Haha of making sure that designers worldwide are being paid what they’re worth and being paid the value that they are providing to their clients. So let, yes, please support us in that way. And as always, we will continue to support you with gorgeous content and information, tips and ideas. We just love it. So,
Kris: Yeah, we love having these chats with you. Thank you for listening. We appreciate you so much. All right, everybody have a great rest of your week and we’ll be in your ears soon.
Donna: Bye!
Kris: Bye!
© Copyright 2024 Design & Prosper Pty Ltd