Why cutting fees will never increase your design value
Let’s talk about the value of design and why it’s important to your strategy - how you approach your marketing, your branding and your pricing.
One thing I've seen a lot of lately - particularly in architecture and interior design - is practices undercutting each other by way of “buying” jobs. By that I mean, charging a lot less fees than you normally would, simply so you can win a project.
There’s often several reasons behind the decision to do this. More often than not, it’s because there is a big driver - such as keeping staff employed or trying to keep your brand out there so you don’t lose market share or go out of business.
Considering the time we’re in, I’m not surprised this is happening. I completely understand the approach and why practices are choosing to do it. But what I want you to know is that there is almost always a flow-on effect that can be extremely difficult to reverse. Not only in terms of impact on your brand but also to the wider industry and how consumers value design in general.
Let’s paint a picture
You’ve just won a job that you’ve priced very low on. It’s likely you’ve highly undercut your competitors to ensure you win it. Now to make that job worthwhile financially, you resource a student or recent graduate on the project with very little guidance from senior team members - because you don’t want to overcook it and use up unnecessary fees. And this is usually the point where things start to go a little pear-shaped.
For the client, they’re likely not getting the level of output from you that you normally deliver. The design detail isn’t up to your usual standard and the wheels are starting to wobble. The staff member isn’t managing the expectations of the client and they’re not happy about it.
So what does the client do? They tell other people about their negative experience - with you; with the industry; with architects and designers in general.
Effect on the industry
Not only have you burned a bridge with that client, but more broadly in the industry, it has resulted in a mistrust of architects and designers. Clients then don’t want to pay any more than that low fee you gave them. In fact, they’re likely to want an even lower fee because you didn’t deliver the first time around. And this then becomes the benchmark in terms of fees for all architects and designers they work with.
Overall, it is a very tough place for the industry as a whole to move forward from.
Effect on your pricing + brand
Let’s take a look at what it does to your pricing and brand if you continue to go in at that low fee. When you drastically undercut fees, your clients then expect that this is the new level of fee they will get from you. For every job. It directly reflects on the value they place on your brand, and unfortunately, it is usually a direct reflection on the output of your work, too. You then become stuck in this vicious cycle of working on jobs that you’re not that passionate about. You start to lose staff. And your long term vision for your brand is lost.
It’s a long way from where you wanted your practice to be in the long run.
How to get out of it
The only way out of this cycle is to stop and think strategically before you price on a job. Ask yourself:
Is this the price that represents the value that we are giving the client?
Will the output be up to the standard that we (and our clients) expect for our design work?
Do we even want to be doing this work, or are we being reactive?
Does it fit out long term vision for our brand, or will it go against us?
If you take this type of approach, you’re much more likely to get the work that you do want. You will maintain your reputation, particularly at this time where clients are very choosy about who they're working with. You will complete the work to the highest of your ability because you and your team are committed and excited about it.
And above all, the industry as a whole will begin to thrive again in this atmosphere of valuing design. It’s about setting a standard from an industry level that will keep everyone’s businesses thriving.