Doing Business as a Designer:The Intensifying Price Wars

(Slide-u-mentary Version - made in google docs)

By Jae Xavier of KnowledgeCity.com 

Blog: jaexavier.wordpress.comTwitter: twitter.com/jaexavier

Introduction

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…

The Professional's View

Professionals know the costs associated with their business: 

Cost to acquire a client (Advertising, Marketing, and Sales)Administrative costsLegal FeesServices that support your businessEmployee Wages / Your WagesBusiness InsuranceHealth CareTaxesBusiness LoansDebt ServicesOffice Lease

The Amatuer's View

Here’s their justification on lower prices:Lower prices mean more business which means I get richerI don’t pay taxesSince I’m a “freelancer”, forming a business entity makes no sense to meI‘ll use templates so that makes my price even lower and services seem fasterI’ll use trendy designs to “wow” my customers so I get even more business

Amateur's View (con't)

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 anywayI’ll undercut any competitorI care about me, me, me, me, and meBusiness 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 loansI 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.  

Today's Design Game (con't)

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 softwareVisit the millions of blogging sites, forums, or just Google “how to” and consume information on…

How to use the softwareHow to do certain design effectsHow to accomplish certain trendsFaster and efficient production techniquesCurrent and historical design theory 

Today's Design Game (con't)

“Innovate” from Deviant Art, magazine or other similar sitesDownload 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

My Point...

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.

My Point... (con't)

Offer services that are:Of higher valueOf higher sophisticationSolves an expensive and unique problem

Associate with clients that:Understand businessAre of higher sophisticationThey don’t compete solely on price in their business

 Now, go get’em! That’s it, I’m done.

Want to know more?

ResourcesSmall Business Management Online TrainingProfessional Sales – Online TrainingMarketing Concept – Online Training ArticlesDoing Business as a Designer: Getting StartedDoing Business as a Designer: Defining Your Competitive AdvantageDoing Business as a Designer: The Price WarsDoing Business as a Designer: The Article Collection at Scribd