When price doesn’t match customer expectation.
Have you ever walked into a furniture store after visiting an IKEA? I mean a real furniture store, with solid wood and designer furniture. Well, if you have you probably suffered from some sticker-shock; but why? It has to do with mis-set expectations. You see, when you’re used to buying furniture from IKEA, you expect to find other furniture thats similarly priced. For instance, if you comparison-shop bookshelves at IKEA you may find the prices range from $39-$279 depending on the style and quality. If you only shop at IKEA, you may become used to (conditioned) the price ranges they have. Even if you go to another furniture store, you’ll bring the IKEA price ranges with you. You may realize it’s a more expensive store, has better service, better warranties, it’s made locally, and the craftsmanship is far superior; but you’ll likely still use the IKEA price range as a foundation for setting your expectations. “Well, this bookshelf is much nicer than anything at IKEA. So, the highest price at IKEA is $279 and this one is 2X as nice. So, it shouldn’t be more than $560.”
It’s hard for most people to evaluate quality unless they have some expertise and experience with the product. In our example, most people that shop at IKEA are buying style and don’t care as much about quality. They generally want a stylish piece of furniture that will last a 2–5 years, instead of a well-built piece of furniture that could last 20–30 years. There’s no question that we live in a disposable society where people prefer to throw-out-and-replace broken items, instead of repairing them.
But the “disposable” mindset hasn’t invaded the minds of business professionals, has it?
Since launching Hostile Sheep, we’ve had about 15 instances (over ~150 projects) where a client walked away from us due to price. It’s always confusing because a number of our clients have mentioned that we were the least expensive experience design and user research firm in Toronto. A number of our clients have issued competitive RFPs, which we won in part due to our cost structure.
Over the years, I’ve attempted to classify the various mindsets that clients have when they approach Hostile Sheep for the first time. I’ve found it useful for determining whether a potential client is going to be a good fit for Hostile Sheep. I thought I’d share; this could be a starting point for you to classify the mindsets of your own customers that engage your business. The goal is to spend the most time with clients that are likely to become valuable partners; and avoid wasting time with people that won’t.
The quote gatherer mindset is seeking out 3–5 quotes and will evaluate them with the team once they’ve been gathered. I like the quote gatherer mindset because we (unlike other organizations) always create detailed proposals for every project we quote on. Our proposals 9 out of 10 times are successful.
- Intent: Getting a quote for a real project
- Caution: Watch out for quote gatherers who may have already selected a vendor and are just requesting a quote to satisfy a corporate policy.
- How to win: Determine whether the quote should simply detail out all of the components of the project or whether it should also include case studies and sell the firm.
The water tester mindset is contacting people to gather information or costs to get a general sense of the market. This mindset may not even have a real project they’re sourcing for. They just want to know if a theoretical project is something they should/could do.
- Intent: Information gathering
- Caution: Watch out for water testers who want to use you to define their project, only to take your proposal to another vendor.
- How to win: Focus on what makes your company different and better than other venders the water tester may encounter.
The deal seeker mindset is looking for a price-value balance. They’re not just looking for the cheapest option; they’re looking for the best quality at the lowest price. The deal seeker mindset is most likely to evaluate multiple aspects of a business (or a proposal), including price.
- Intent: Getting the best deal
- Caution: Watch out for deal seekers who are willing to put unrealistic constraints on their project just to achieve a lower price or a condensed timeline.
- How to win: List out all deliverables and assumptions. While good practice in general, deal seekers want to know everything that’s going to be included; as well as everything that wouldn’t be included.
The price sensitive mindset has a budget in mind and will let price trump any other considerations, including quality. This mindset would rather buy a cheap solution than a quality solution that costs more. This may seem like an ignorant mindset but some people just need to get something done, quality can be adjusted or iterated upon at a later date.
- Intent: Getting a project done inexpensively
- Caution: Watch out for price sensitive mindsets that ask for detailed price breakdowns, especially by the hour. They may try asking for small cost savings on a multitude of line-items. Also beware of these mindsets if they start asking about what’s included for free (i.e. free printouts, free courier fees, free lunches, etc.)
- How to win: Price sensitive mindsets can be changed, so a strategic decision may need to be made. Can we offer a discount to establish a relationship? Be very careful doing this. But SHOWING how much value you offer, via a discounted-rate project, can be very effective.
The time restricted mindset has a deadline. In many cases the time restricted mindset will want a project to be completed as quickly as possible. These cases are willing to sacrifice either quality or price to get the project done quickly.
- Intent: Getting a project done quickly
- Caution: Watch out for time restricted mindsets with unrealistic timelines. Unrealistic timelines are usually the result of a fixed deadline that has little-to-no flexibility regarding quality of deliverables; wanting everything in 50% of the time.
- How to win: Establish a realistic timeline and if it doesn’t meet the clients requirements, be ok with walking away. The worst thing you can do is agree to a timeline and miss the deadline or underdeliver.
The referral mindset is usually my favourite mindset because they don’t usually need to be convinced of our value. Referrals usually want to validate the project will be in good hands if they select you. My experience has been that referrals generally want quality and good client service over anything else.
- Intent: Starting a relationship
- Caution: Watch out for referrals from people you haven’t worked with in a long time. Especially if you have changed your offerings or capabilities since working with the referrer.
- How to win: Treat them with all the respect you’d give to the referrer. Think of the referral as a long-term relationship that’s just getting started.
The risk adverse mindset is another great mindset for potential clients to have. This mindset wants to mitigate the risk of project failure (or project rework). In many cases, people with this mindset specifically want to hire a professional service firm to distribute the risk. Although I have encountered this mindset, it’s far more prominent in regulated industries such as the legal field or accounting.
- Intent: Delegating responsibility to professionals
- Caution: Watch out for risk adverse mindsets that expect unrealistic results. Even the biggest professional service firms can’t reduce risk to zero.
- How to win: Don’t overpromise; err on the side of underpromising. Only agree on what you’re 100% comfortable with.
Some people like the micromanager mindset, it can seem like they have everything put together and are very detail oriented. I tend to avoid this mindset when possible. Ultimately, the micromanager thinks the customer is always right and wants vendors to do as they’re told. This is great for monkeys who need to be told what to do; for organizations like Hostile Sheep, we need the freedom to advise our clients and use processes we’ve developed, are familiar with, and are proven to work.
- Intent: Making themselves look good.
- Caution: Watch out for micromanagers who want to use a project for some office-politics purpose. If they don’t trust you to do your job, they shouldn’t hire you.
- How to win: Ask for permission to do it your way. Even if they say no, it opens a discussion about what they really want control over.
Got my mind set on you (GMMSOY)
The GMMSOY mindset is pretty-much the best mindset you can hope for; they already chose to use you before contacting you. This mindset is usually the result of having worked together multiple times; thus, is usually a returning customer. However, I have been approached a couple times where a potential client saw our work, heard me speak, or read something I wrote — and were convinced they wanted to partner with us before ever engaging me.
- Intent: Getting the job done
- Caution: Watch out for the GMMSOY mindset who may not know how you work or exactly what to expect when working with you.
- How to win: Just because someone has chosen you, you’re not automatically a good match. Sometimes it’s ok to pass up a bird-in-the-hand for one in-the-bush. (i.e. Make sure the client is one that you would hire.)
Don’t get discouraged if a client walks away due to your price structure. The worst thing you can do is drop your prices in response to a client, or potential client, suggesting you’re too expensive. I know how difficult it can be to hear those words YOU ARE TOO EXPENSIVE FOR ME. It can conjure up feelings of anger, worry, sadness, stress, self-doubt, and all kinds of other emotions that could make you question yourself.
Luckily, I have a bunch of great clients who remind me that the value I provide far exceeds their expectations and price they pay. So, when a new client suggests I’m too expensive, I know they’re either ignorant regarding what similar services cost or all the value Hostile Sheep offers.
Just to illustrate my point; I recently got a request to quote on a usability study a furniture store wanted to conduct on their eCommerce website. When I quoted them $20k, the person just about choked on their coffee. He blurted out “Oh, I was thinking it would cost $5k at the most.” I explained that we don’t do coffee-shop testing, but if they were looking for down-and-dirty usability testing I could refer them to another firm. I also explained that we don’t offer that service because 80% of coffee-shop testing is invalid and can steer organizations in the wrong direction. I told the new client that recruiting would be an extra charge if they wanted us to handle it, and recruiting 15 participants could cost $3–5K alone. After explaining the process of testing, the new client was able to take our proposal away and (at least) compare us to other vendors in a more accurate way. Usability testing isn’t just jumping onto 15 one-hour zoom calls over a few days. It includes our strategic guidance regarding recruiting, writing a screener, creating instructions for participants, setting up a proper testing environment, writing a discussion guide, working with the team to schedule all of the participants, technical support for participants, conducting each session and re-setting for the next session, documenting the findings, timing scenarios, analyzing each session, creating a long-form report, illustrating any recommendations, and creating a presentation for the team, presenting and clarifying the findings.
If the client thinks: “I don’t need all of that”, then we know we’re not the right partner for this project. If the client realizes this is how to do usability testing the right way, they’ll likely award us with the project.
Don’t cut your rates; help them understand your true value.