Have you been ‘preconditioned’ to provide low architectural or interior design fees? Today we’re reviewing the best way to address this sneaky fee negotiating tactic. Let’s start with a common scenario:
This negotiating tactic nearly always starts with a friendly phone call from a potential Client.
The reason for the call is they’d like to solicit a fee proposal (from you) for their new design project.
During the phone call, the Client describes their fantastic new project, with much enthusiasm, using phrases like:
“This project will be a landmark project for this town.”
“We’ve already received overwhelming public support.”
The Client goes on to say that they have heard a lot of great things about your firm and would like to work with you. So they ask:
“Would you be interested in putting a fee proposal forward?”.
You respond with gusto by thanking them for the opportunity and confirming that you’d be delighted to submit a proposal for this new and exciting project.
The Client thanks you for your interest and follows up by saying:
“There is, however, one issue that needs to be mentioned…”
“Due to the structuring of funds for this project there is only a very limited budget for Design Services!… so it would really help the appointment process if you could provide your most competitive fee proposal!”
What’s going on?
Well, either consciously, or subconsciously, the Client has just tried to ‘precondition’ you into providing a low Design Fee on your first submission.
Essentially this exciting new project is now yours to lose!
What happens next?
You take this information on board and wrap up the conversation by saying,
“Let me see what I can do… give me a couple of days to review the project and I’ll get back to you with my proposal.”
You’re keen to appease the Client and secure the work so over the next couple of days you review the project details and begin the process of finalizing your fees.
In light of your recent ‘preconditioning’ phone call, you take a more aggressive approach to resourcing this project: estimated man-hours are reduced to a minimum and allowances are restricted to only the essentials.
You then finalize the proposal and send it to the Client, hoping they’ll appreciate your generosity and award you the commission without delay.
Why is this a problem?
The big problem with this approach is that fees are subjective, and your version of a competitive fee won’t necessarily match your Client’s version.
Unless managed with care, your generous proposal will be viewed as a starting point for future negotiations, and not the fair and reasonable design fee that you intended.
How can Architects & Interior Designers demonstrate fairness in their fee proposals?
It’s important to recognize that nobody really knows how much anything should cost.
(Note: To help you with your design fee negotiations we’ve created a starter kit packed full of free resources)
As human beings, we all believe we’re very good at judging price and value. However, in reality, when trying to judge a fair price, all we’re really doing is comparing similar products, and services, and then basing our estimate on the differences.
You see it’s the difference that we’re really good at estimating, not the absolute value.
Behavioral Finance experts call this comparison process ‘Anchoring and Adjustment’. For more details on this subject, I would recommend reading: Priceless by William Poundstone or The Design Professional’s Guide to Design Fee Psychology.
How should Architects & Interior Designers respond to the preconditioning negotiating tactic?
Knowing that fees are subjective, the best way to manage this tactic is for Architects and Interior Designers to avoid offering Design Fees in isolation. This is because isolated fees don’t offer comparisons, and are therefore harder for Clients to value.
Instead all Architects and Interior Designer should apply the principle of ‘Anchoring and Adjustment’. This requires providing all Clients with a range of different fees, and different service options, to choose from.
For example you could provide three design service options at three different price points: Basic, Advanced and Platinum.
By providing a range of different design fees and service options we’re providing Clients with the comparisons they need to make a purchasing decision. If they’re looking to save money then you have a basic (more affordable) design service options to purchase. However, if they’re interested in getting the best service possible, you have a platinum (more expensive) design service option to purchase.
Either way, it’s the Clients choice to make, and by empowering the Client to make purchasing choices we reduce the need for future negotiations.
The options approach to fee proposals is based on a pricing strategy economists call ‘Price Discrimination’.
We’ll be exploring how to apply this strategy in more detail in the coming weeks.
Alternatively, more information (including a case study) is available now at the following link: The Number One Mistake Design Professionals Make With Their Design Fee.
Let us know what you think:
Are you familiar with the term ‘Price Discrimination’? Let us know in the comments section below by saying “Yes” if you are, or “No” if you’re not.
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Price Discrimination Training for Architects & Interior Designers:
You don’t have to wait to learn about Price Discrimination, here are 3 resources that are available right now, to help you with your next fee proposal:
1. The Design Professional’s Guide to Design Fee Psychology (eGuide): https://blueturtlemc.com/product/design-fee-psychology-eguide/
2. How to Sell a High-Quality Design Service (Free Blog): https://blueturtlemc.com/blog/how-to-sell-high-quality-design-services/
3. The Ultimate Fee Proposal Online Training Course (CE/CPD points available):