Today I want to show you a simple fee proposal pricing strategy that will allow you to:
• Increase your fee proposal conversion rate,
• Reduce the need for fee negotiations,
• Increase your design fee,
• Improve Client relationships and
• Provide a more ethical pricing model
Sound too good to be true?
Let’s start with a common scenario:
The request for a fee proposal:
A Client calls you and requests a fee proposal for their new and exciting project. During the initial conversation, they confirm they’ve heard many great things about your firm and they’re keen to work with you.
The Fee Proposal Meeting:
So, you organize to meet with them, walk their project, confirm their requirements, and show them a portfolio of your completed work. At the end of the meeting, you advise that you’ll have a fee proposal for design services ready for their review and consideration before the weekend.
The Fee Proposal:
You then return to your office and spend the next couple of days thinking about them, their project, and the design fee that you’re hoping to include in your fee proposal.
How much should Architects & Interior Designers Charge?
You’re aware that for this type of project, your firm typically charges a percentage fee equal to (let’s say) 8 percent of the out-turn construction cost. So, after some careful consideration, you draft your fee proposal for design services and include your 8 percent fee.
While reviewing your draft you’re reminded that over the last couple of months you’ve submitted 4 similar fee proposals, to similar Clients, and, despite initial enthusiasm, none of these proposals have currently converted to paying projects.
(Note: To help you with your fee proposal and negotiation strategy we’ve created a Fee Proposal Mini-Series which is currently available FREE of charge. Click the image below to learn more)
Fee Proposal Self Doubt:
This makes you feel uneasy about the current situation. Maybe it’s time to reduce your design fees to help encourage a conversion?
So, you remove the 8 percent fee from your draft proposal and replace it with a lower, more attractive 6 percent offer. You then once again sit back, review your draft, and think about the Client and the project one more time.
Fee Proposal Discomfort:
Unfortunately, however, you’re still not comfortable with your proposal. You know that people associate price with quality, and you know that this Client is from an affluent neighborhood.
If you don’t offer a reasonable fee then the Client may think you don’t have the experience, or expertise to complete the work. So, you remove your 6 percent offer and replace it with a more expensive 10 percent offer… but you’re still not comfortable.
Fee Proposal Reassurance:
In an effort to find a suitable answer you decide to ask a coworker for their opinion. You also search the internet to see if you can find any design fee bench-marking data. With every new bit of information, there is yet another iteration to the design fee, but none of it seems to provide you with any comfort.
Are you ‘Negotiating against Yourself’?
Now if you’ve attended the Fee Proposal Workshop (or read the Design Professionals Guide to Design Fee Negotiations), you’ll be familiar with this frantic, painful behavior. It’s what negotiation experts call ‘Negotiating Against Yourself’.
Magical Design Fee Numbers:
The reason it’s so painful is that we’re all trying to find that magical fee number – a number that’s going to maximize our fee proposal conversion rate (i.e. the number of people who accept the fee proposal) while also maximizing our profit levels.
The problem is we’re all searching for a number that doesn’t exist. Why? Because purchasing decisions rely on emotions, not rational financial criteria. It’s not the actual number that’s going to win you the project. It’s how the Clients feels about that number.
Some Clients will interpret any fee (in isolation) as a starting point for negotiations and will only feel good about saying yes once they feel like they’ve achieved the lowest possible fee.
While other less financially sensitive Clients may be looking to satisfy other interests, such as reducing their risk or responsibility. They may have been prepared to pay more for design services but weren’t given the opportunity to do so.
How should Architects & Interior Designers address this behavior and avoid negotiating against themselves?
This behavior can be addressed with one simple word “OPTIONS”.
You don’t know how much the Client is prepared to spend. The Client probably doesn’t know how much they are prepared to spend.
Instead of offering just one fee and one service option and hoping it meets your Client’s purchasing criteria, it’s far more effective (and far more ethical) to offer your Clients a range of fee and service options.
Each service option should address a different price point, and then let the Client choose the option that best meets their requirements.
Not sure how to offer options?
We’ve created a FREE Fee Proposal Mini-Series that’s available right now. Click the following link to learn more: https://blueturtlemc.com/fee-proposal-mistakes/