Price undercutting can be one of the more frustrating aspects of selling web design or other digital marketing services to small businesses. It’s an unavoidable reality in an industry that has become increasingly saturated by service providers and low-cost automated alternatives. It is also an inevitable shift that mirrors so many other industries that have faced the same challenges in recent years.
Why You Shouldn’t Try to Undercut Your Competition
If you can’t beat ‘em, join ‘em, right? If your prospects are focused on price, discounting the cost of your quote is a tactic that comes with its own set of problems.
First, undercutting is actually a very good way to not only shrink your profits but hurt your chances of landing jobs. If your prospects see you dropping your prices dramatically or giving a “discount”, they may doubt the authenticity of your initial proposal. If your work is as valuable as you say, why should you allow someone else to dictate what it’s worth?'If your work is as valuable as you say, why should you allow someone else to dictate what it’s worth?' - Omari Valentine, Off the Lip Click To Tweet
Second, you will be catering to clients who will continue to expect the same services at the same rock-bottom rates. Resist the urge to fight fire with fire: sell your value, and you will get clients that value what you sell.
5 Key Strategies to Combat Price Undercutting
1. Pre-qualify Your Leads
You should always pre-qualify leads by asking questions that will weed out the ones who are only looking for the best bargain. This will allow you to adjust your pitch to focus more on the value you will provide, rather than the cost of your work. Ask questions that help you understand whether the prospect has a strong “why”; if not, you’re probably better off leaving them alone.
Some examples might be:
- Why do you want a website?
- When do you want your website developed?
- What will happen if you don’t have one in place?
Asking the right questions can get to the core of the prospect’s need and help you understand if they are best suited for your services.
2. Work on Your Long Game
If your prices are higher than your competitors’, you will likely need more touches to make the sale. Think of this as an extension of your qualification process. When you first meet with your qualified prospects, don’t shy away from discussing the price range of your services. If you have made a strong impression, your prospects will likely want to connect at a later date once they have had time to allocate funds for the project.
3. Restructure Your Prices
Many software publishers have eschewed selling large releases for the subscription-based model. That’s partly because it’s much easier for their target customers to swallow a $20 monthly charge than a single $1000 purchase. Likewise, small business owners have a hard time committing thousands of dollars to a solution, even if the value is there. The reason? Cash flow.
As business owners, we all have income and expenses. Sometimes they are forecast out a few months to a year, but they are rarely forecast beyond that. Meanwhile, a website is an investment that will last on average 2 years and 7 months. So that $3,000 investment? It’s really under $100 per month.
Now, I’m not recommending stretching out your payments for 2 ½ years, but if it helps the client to build out the core product and then piece together value-added features, it may feel like less of a sacrifice to break up the deliveries or stagger the payments.
4. Locate an Underserved Niche
Web design has become a saturated and commoditized service industry with many low-cost options for small business owners. Finding a niche can serve two purposes: it gives you value above the generalists out there, and it narrows your market to customers who are not focused solely on price.
Your niche can be focused on a vertical (such as medical supplies), or it could be focused on an area of expertise (i.e. a technical niche, such as .NET Framework). If you design great websites for real estate agents, for example, the additional value of that expertise will be worth a premium for prospects in that market. It is important, however, to select your niche wisely, as not all verticals will be conducive to investing large sums of money on internet marketing.
5. Reposition Yourself in the Market
It is no secret that many well-known companies have staged successful pivots to build themselves into highly profitable behemoths. Groupon started as a social fundraising site. Twitter started as a social network for podcast subscribers. The same principle can be applied to your small local boutique business if you find that your market is saturated and profits are sagging.
You may find that your value-added services are in hotter demand than your main product or service line. You can respond by pivoting into a less-saturated market entirely. For example, if you are struggling to charge a living wage for your web design services, and you find that most of your local clients are willing to pay significantly more for advertising, it can be an effective strategy to pivot into advertising.
In summary, find the customers that are willing to pay what you charge. They are out there. And if they aren’t, re-evaluate your value offering. You may lose the occasional sale by staying out of the predatory pricing rat-race, but your business will benefit in the long run.