Have you ever encountered a situation where a prospect told you, “Thank you so much for your quote, but we asked around, and your competitor (Agency XYZ) charges 10% less per day? Could you give me at least a 10% discount?”
It’s frustrating. It is much effort and hard work to convince prospects to pay full rates for development work. Somehow, everybody wants a discount. Let’s find out how you can sell value and not compete on price.
Why does that happen?
Should you quote more upfront to then go down? That strategy might work for a while, but eventually, you might end up where you are right now. If you are a freelancer or an agency currently quoting development work by the hour, or even if you offer full days, you are selling a comparable commodity.
Let’s say you need to buy a new computer for a new hire. The new team member requested an Apple machine. Would you purchase the laptop directly from Apple, or do you buy it from another vendor?
Often, comparing computer prices helps to save a few hundreds of dollars. Therefore, instead of paying the full fee on apple.com, you get the same model on Amazon.com with a moderate discount.
What is selling over price?
If your product is a commodity (like it can be compared easily), its differentiators are its attributes. For instance, if you are selling developer hours, you can differentiate yourself over:
- Overall Developer Experience
- Programming Language
- Experience in other technologies (Postgres, Elasticsearch, Git, …)
Other developers will likely fit this profile, too. If you had to choose between two developers with the same level of experience and skill set, who would you select? The only differentiating factor is the price. And the developer charging the smaller price wins.
Now, you could start to charge a low rate by default to win the business. Setting a low rate, however, will impact your revenue, and therefore also your profits.
On top of that, there’s also the psychological factor. If you compare two products, both with identical features, one twice as expensive as the other one, what are your expectations towards them? Often, the lower-priced product is perceived as inferior, no matter what the actual quality is.
Therefore, it’s another reason not to charge too low prices by default. Otherwise, buyers won’t perceive your offer as Premium.
Now, how should you sell instead? Stop offering comparable solutions. Your competitors might still quote and sell individual developer days and hours. But you start to do something different now, however.
Instead of handing in quotes like everybody else, start to sell a value. When you qualify a new lead, you might have asked questions like:
- What is your technology stack?
- What is your deadline?
Now, ask your prospective client, “What is the result you’re after?”. The result might be something like “Increasing market share” or “building a superior platform.” But what difference does this question make?
By focusing on the result, your goal is not to sell as many hours as possible anymore. Instead, you focus on helping your client to achieve their business goals. You will still write code and use your technical expertise, but it’s no longer the main factor. Instead, if you can guarantee specific business outcomes, such as meeting deadlines, or performant systems, you can charge additional money. The best part is that you can set these premium rates because you don’t compare against your competition anymore.