Doing Business as a Designer: The Intensifying Price Wars

Posted on June 25, 2010

0


Another reason why the “price wars” are intensifying in the design arena is that newbie freelancers (aka amateurs) don’t understand the economics of their services nor do they care to. Therefore they will drop their prices below a de facto “industry standard.” And of course, the customers win although the amateurs also “think” they win.

Ignorance is bliss? That’s an understatement nowadays.

Yes, of course this is a huge, broad, sweeping statement the size of a tsunami. Here’s why…

Professionals know the costs associated with their business:

  • Cost to acquire a client (Advertising, Marketing, and Sales)
  • Administrative costs
  • Legal Fees
  • Services that support your business
  • Employee Wages / Your Wages
  • Business Insurance
  • Health Care
  • Taxes
  • Business Loans
  • Debt Services
  • Office Lease

Amateurs don’t have this worldview. Here’s their justification on lower prices:

  • Lower prices mean more business which means I get richer
  • I don’t pay taxes
  • Since I’m a “freelancer”, forming a business entity makes no sense to me
  • I‘ll use templates so that makes my price even lower and services seem faster
  • I’ll use trendy designs to “wow” my customers so I get even more business
  • My profit margins will be bigger because (see above)
  • I don’t care if my prices are lower than de facto industry standard, I win anyway
  • I’ll undercut any competitor
  • I care about me, me, me, me, and me
  • Business economics? LOL! I’m neither Alan Greenspan nor Ben Bernanke (wait, who are they again?)
  • “Free” software powers my “freelance” business; therefore I don’t need business loans
  • I have no shame in my game, so why you ask’n me?
  • I don’t care about the nation’s economy, I care about the “me” economy, me, me, me, me, me, me.

Today’s Design Game

The design industry is changing rapidly because the barrier to entry is not what it was in the 1990’s.

Here’s a six step “recipe” on how amateurs get into the design game in 3 months or less:

  • Go onto the thousands of file sharing sites and download software
  • Visit the millions of blogging sites, forums, or just Google “how to” and consume information on…

How to use the software
How to do certain design effects
How to accomplish certain trends
Faster and efficient production techniques
Current and historical design theory

  • “Innovate” from Deviant Art, magazine or other similar sites
  • Download free fonts, free icons, free PSD templates, etc.
  • Use social media to promote services: Twitter, MySpace, FaceBook, WordPress, Tumblr, Typepad, Squidoo, Deviant Art, Flickr, YouTube, Etc.
  • And sprinkle a bit of “economic” urgency; better yet let’s take it up another notch and go for maximum greed

There is no stopping this from happening. A new “freelancer” is born every second around the world. The process repeats itself over and over and over again.

What are professionals to do these days? Stop using price as your competitive advantage.

Offer services that are:

  • Of higher value
  • Of higher sophistication
  • Solves an expensive and unique problem

Associate with clients that:

  • Understand business
  • Are of higher sophistication
  • They don’t compete solely on price in their business

Now, go get’em.

That’s it, I’m done.

Resources:

KnowledgeCity.com Marketing Strategies

Related Articles:

Doing Business as a Designer: Defining Your Competitive Advantage

Doing Business as a Designer: The Price Wars

Posted via email from Jae Xavier

Advertisements
Posted in: price wars