It’s an age-old question for services companies: should we publish our prices, at least some of them, or should we wait until we’ve had a conversation with a potential client before discussing price? Recently at Terralien we’ve changed our answer to that question and decided to start publishing some of our prices, and I thought I’d write a bit about the thought process that went in to the decision.
Actually this process started at least a year ago when I added a little drop-down box to our contact form that had general budget information in it. The options started at $10k and went up from there, and the reasoning was simple: I was getting at least one request a week from people looking to get their huge projects done for $2k (more or less). Talking to people with such unrealistic expectations was a complete waste of time: no, we’re not going to do your 400+ hour design/development project for $5/hour. Really. And just putting that little $10,000 budget as the lowest option immediately cut these requests out almost completely.
Now we’ve taken it a step further: on our Product Outlining and Launch Cycle pages you’ll find a published price for each of those services. These prices, and a price for our Background Work, also show up on our updated contact page as well. Of course, all prices are negotiable – we’d love to customize a project for you that fits your budget and your timeline. That said, we think that providing at least a starting point for negotiations helps potential clients to envision and plan what it would take to get their idea live, and that’s important for an entrepreneur.
We had some interesting internal discussions about publishing prices, and I’m not 100% sure it’s something we’ll do long-term – for now it’s very much on probation. There are concerns that it makes us appear as a commodity instead of the custom software shop we are. On the other hand, there was a lot of internal excitement about being so transparent. As entrepreneurs ourselves, we know how useful it can be to get an initial peek at what it might take to launch our ideas before diving in to details negotiations.
So what are your thoughts? Should services companies publish at least some of their prices? Should Terralien? Does it help or hurt?
Nathaniel,
I agree that publishing your rates is a good thing. Too many times in the past, I have said yes to a meeting where I discover that the energized and willing prospect is expecting to pay $200 – $400 to be the next Amazon or MySpace. Part of good sales is recognizing those people from a mile away, and fending them off with a link to Google Pages or Homestead. Another part is making it clear up front that you are a professional, and posting rates that shout “I’d darn well better be!” can really drive that home in a good way. Those who are serious will see the value in your pricing, and it won’t turn them off. Those who aren’t serious will be mercifully brought into a realistic perspective at a quick glance, saving you valuable marketing hours.
There is always the question in the back of our heads: “Will my competition have an advantage with my pricing available for easy review?” Reality is the antidote to that fear: Our competition is out there, whether or not we communicate with them. They can pose as a prospect and milk the info from us, or read out rates right on our sites. And either way, the customer we are all trying to help will eventually have a spreadsheet with quotes from all of us, if they are researching service providers in our field.
I have moved from the direct startup-development service you provide into software development for other developers. The same principles apply, and having a clearly marked pricetag is just as important in both areas. This link below is more relevant to what I’m doing right now, but you may find it an interesting read as well:
http://www.pchristensen.com/blog/articles/what-kind-of-software-would-people-actually-pay-for/
With the increase in automation and open/free publishing for the masses, society is more and more struggling with the balance between dropping prices and rising expectations. One stable factor throughout all this change is the solid value of a person’s time; most especially a person who understands technology and business. Those are the people who bring a real return on investment to those that they help, and are worth every penny they charge.
Congratulations on a good business decision. I am sure it will benefit you in many ways.
All the best,
David:.
Wow David, thanks for the well thought out response!
You mention the spreadsheet, but one thing I find interesting is how few clients seem to do extensive research on providers before settling on one. Maybe I’m wrong, but it’s my impression that a lot of prospects go with the first shop that talks a good game (which is sometimes Terralien!) rather than doing even a cursory survey of the market. I wonder if a lot of this is due to the lack of transparency in the marketplace and the resulting need to spend significant time with each provider to even find out the basic terms of a deal. I’d love to see ways to increase the transparency of the Rails services market (and services markets in general) so that clients are more apt to go with the best fit rather than the first “looks good” fit.
BTW, best of luck with NMOX – looks very interesting!