When Should You Cut Your Price?
Three weeks ago, a long-standing client asked me for help. She wanted to hire me for 90 hours of copywriting work over six weeks.
That troubled me; I don’t price by the hour. Pricing by the hour is a bad idea because:
- It interferes with your efforts to ‘price to value.’
- You stop being a trusted advisor, and start being a wage worker.
- It gets in the way of budgeting — if you take more time to do something, you’re forced into an unpleasant conversation.
- It often turns into a nickel-and-dime discussion. You’ll be compared with copywriters who make $20/hour.
So I gave her my hidden, super-secret consulting rate. She gulped, thanked me for my time, and hung up.
Oh, well. Can’t win them all.
Last week, she and I sat down for coffee, and I did something unorthodox. After a more detailed discussion, I cut my hourly rate by 50% and won the project.
I know you’re shocked. I was shocked. I went against the standard advice we get from AWAI.
With good reason, they warn that price-cutting is a short path to the poorhouse; it diminishes your value in the eyes of the prospect, it will wreck your satisfaction, and gets in the way of your long-term success.
All that advice is sound and true IF you use price-cutting as a knee-jerk tactic with every prospect. You’ll undermine your business by always cutting your price. But in this case, cutting my price was the right thing to do. Why?
- I negotiated fewer deliverables. Basically, she now wants three white papers. Each is six or seven pages long. I tallied what I’d charge for three white papers and tailored my revised hourly rate to fit.
- The project fits my business strategy. It’s going to stretch me in new directions, give me new samples, and connect me with a few new prospects.
- She still sees me as a trusted advisor. At one point, she told me what she paid other writers. I got her to agree to a rate that was 200% more than her other writers. That’s because I have credibility — she sees value in me. I’m her consultant — and being paid as such.
- The project is lucrative. Yes, I’ll be spending more time on the project than I’d like, but it’s still a nice, five-figure project, with plenty of potential upside in 2013.
- I negotiated better payment terms. We agreed on weekly billing and Net 15 terms — a departure from the past. That lets me have constant cash flow from the project, quick turnaround on payments, and a very direct link between effort and reward. If she wanted to pay me on Net 60 terms, I would have been disappointed and possibly less likely to negotiate and commit. Cash in hand, especially in November and December, comes in handy!
Basically, I crafted a win-win scenario. She gets the support, advice, and deliverables she needs, I get cash flow, samples, new prospects, and business development out of the project.
Most importantly, we both get a better relationship. I focused on what she needed. As I said, she’s a long-standing client. I want 10 more projects from her next year. After sitting down for coffee, I realized that I valued my relationship more than my pocketbook.
Many new copywriters see themselves as selling a commodity product — it’s cheap and cheerful, do a project and find another client.
But copywriting ISN’T a commodity product. It’s a service that becomes better over time as your relationship with the client grows. So making a compromise to serve the long-term relationship is important now and again, just as it is in marriage or friendship.
That approach got me a valuable project with short-term benefit and long-term upside. Has this approach ever worked for you? Has cutting your price ever been the right thing to do? Did it work out? Did you get more business afterwards?
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