Comments on: When Clients Pressure You for Lower Fees http://www.internetviz.com/psjblog/2010/06/pressure-for-lower-fees/ Insights for B2B executives and service professionals Fri, 27 Apr 2012 12:57:58 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: ANdy http://www.internetviz.com/psjblog/2010/06/pressure-for-lower-fees/comment-page-1/#comment-59 ANdy Thu, 15 Jul 2010 17:57:52 +0000 http://www.internetviz.com/psjblog/?p=695#comment-59 I think it also helps to let prospects understand better what the cost structure for a services engagement is. Unlike software, or even a manufactured good, services are delivered by people who are compensated. In software, it's normal to discount 20-50%. For manufactured goods, you can get down the cost curve pretty quickly. With people, fully loaded compensation takes up quite a bit of cost. Most companies understand this but not all. Another thing that you should consider before discounting is that what is your opportunity cost. If your team is rather busy, then you should feel fine about holding the line. You may consider doing a discount if timing allows for you to improve utilization that you wouldn't otherwise be able to do (e.g. next week we have someone free). In this way you are sharing the advantage. As mentioned in the article though, be careful about setting a precedent. They'll always remember the lower price. I think it also helps to let prospects understand better what the cost structure for a services engagement is. Unlike software, or even a manufactured good, services are delivered by people who are compensated. In software, it’s normal to discount 20-50%. For manufactured goods, you can get down the cost curve pretty quickly. With people, fully loaded compensation takes up quite a bit of cost. Most companies understand this but not all.

Another thing that you should consider before discounting is that what is your opportunity cost. If your team is rather busy, then you should feel fine about holding the line. You may consider doing a discount if timing allows for you to improve utilization that you wouldn’t otherwise be able to do (e.g. next week we have someone free). In this way you are sharing the advantage. As mentioned in the article though, be careful about setting a precedent. They’ll always remember the lower price.

]]> By: Steve Bradley http://www.internetviz.com/psjblog/2010/06/pressure-for-lower-fees/comment-page-1/#comment-56 Steve Bradley Thu, 08 Jul 2010 13:06:25 +0000 http://www.internetviz.com/psjblog/?p=695#comment-56 How do you respond to other good firms that don't know your recommendations? Also, many buyers are simply purchasing agents and do not understand or appreciate value. How do you get these persons to understand the value? What if you are new and don't have an established reputation to bank on? I think the article neglects the fact that there is a "market price" for services that even the best firms must consider. How do you respond to other good firms that don’t know your recommendations? Also, many buyers are simply purchasing agents and do not understand or appreciate value. How do you get these persons to understand the value? What if you are new and don’t have an established reputation to bank on? I think the article neglects the fact that there is a “market price” for services that even the best firms must consider.

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