The one question on the minds of many Design Professionals is how can they increase their architectural or interior design fees without losing potential Clients. So we devised an experiment to answer this question, and it goes something like this:
Increasing Architectural and Interior Design fees:
Design Professionals who attend the Fee Proposal Workshop are all asked one very simple question:
“What’s the maximum price you’re prepared to pay for my bottle of wine?”
It’s a 2013, Shiraz, from a winery in South Australia called the Cat Amongst the Pigeons (let us know your answer in the comments section below).
What’s this question got to do with Architectural and Interior Design fees?
Now you maybe wondering why we’re asking this strange question… so let me explain: This experiment has been designed to test just how much attendees ‘value’ the wine, and therefore how much they’re prepared to pay for it. We want to know their reserve price preference for this bottle of wine.
(Note: To help you with your fee proposal and negotiation strategy we’ve created a free Starter Kit packed full of useful resources):
How much are people prepared to pay?
You see despite what you may have thought, attendees don’t value the wine equally – we’ve asked this question at over 300 different live workshops and we always receive a wide range of answers from $0 (from those who don’t drink wine) to over $100 (from those who really like wine).
For example, take a look at the photo below that shows the results from the New York City Fee Proposal Workshop, where attendees answers ranged from $0 to $150.
Even with something as simple as a bottle of wine, our reserve price preferences are extremely varied.
So, when it comes to selling that bottle of wine, we face a very familiar dilemma:
“How much should we charge for our bottle of wine?”
If we pick a price in the middle of the range (say $50) we’ll miss out on the potential profit from those people who value the wine and are prepared to pay more.
If we pick a price higher up in the range (say $75) then we’ll miss out on selling the wine to those people who value wine but aren’t prepared (or can’t afford) to pay $75.
And if we pick a price lower down in the range (say $25) then we may miss out on selling the wine to those people who value wine but are discouraged by the low price tag…. so how much should we sell this bottle of wine for?
How Price Discrimination can Increase Architectural and Interior Design fees:
This is a common problem faced by all businesses and it’s usually addressed by implementing a pricing strategy economists call ‘Price Discrimination’.
Price discrimination requires offering your Clients a range of different versions of your design service, at different price points.
You then let the Client choose the design service (and price point) that best matches their needs.
As demonstrated in the experiment above:
More Price Points = More Clients = More Potential Profit!
So if I’m selling wine, and I want to maximize my conversion rate and profit margins, I should offer my Clients a range of different wine options so that I can cater to the reserve price preferences of a larger pool of Clients. This can be achieved in many ways for example:
I can offer different qualities of wine at different price points:
I can offer different packages of wine based on complimentary products, such as a bottle opener and/or wine glasses.
Or, I could offer different options based on the quantity of wine being purchased (i.e. The more bottles you purchase, the less it costs per bottle).
Now you may be thinking that this approach only applies when selling tangible products… like a bottle of wine. So, how can you offer options when selling a design service?
How to Increase Architectural and Interior Design Fees with Options:
Just like product suppliers, design service providers can also offer options in many different ways.
Sustainable Design (Quality):
For example, you can offer Clients different qualities of design services based around different types of sustainable solutions. For details on how to offer design service options based on: Conventional vs LEED vs WELL, see this post: How to Benefit From LEED Certification and Decoy Pricing
Forms of Appointment (Packages):
Alternatively, you can offer Clients different service options based around different forms of appointment. For example, you could offer a “Design Only” appointment vs a “Design Build” appointment.
Level of Service (Quantity):
Or you could offer Clients different service options based on the quantity of work to be completed. For example, Design Only vs Design + Procurement vs Design + Procurement + Project Management.
These are just three examples of how Architects and Interior Designers can offer their Clients a range of design service options to cater to different reserve price preferences.
To learn how a multi fee pricing strategy can help you increase your architectural or interior design fees, check out the case study in the following blog post: The Number One Mistake Architects and Design Professionals Make with their Design Fees.
Let us know what you think:
Do you already offer your Clients a range of different services at different price points? Let us know in the comments section below by saying “Yes” if you do or “No, not yet” if you don’t.
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Ready to Improve your Fee Proposal Skills?
Here are three resources that are available right now to help you write your best Fee Proposals yet:
1. The Design Professionals Guide to Pricing Design Services (eGuide):
2. How to Increase your Fee Proposal Success Rate with Options (Blog):
3. The Ultimate Fee Proposal Workshop (CE/CPD points available):