Pricing Intelligently

Pricing is the entire business. If you don't get pricing right, your business will not make it.

I've often been told, Hazrul - you are expensive. Perhaps I've worked with Chinese companies for quite long. I think it's ridiculous to price lower just because I'm a Malay. It makes no sense. Why is there a market value for being of a particular race?

The first time I priced wrongly was when I first started work. The economy was bad. Jobs were scarce. And I had the assumption that I won't get a job easily because I'm Malay. I priced myself below market rate, and after comparing notes with my peers, so did they. I realised that most non-Malays set their starting pay higher, and regardless, they'll still be employed. We were concerned, that if it came to 2 candidates, one Chinese and one Malay, all else being equal, the final decision factor is price. We felt that there was still racial considerations for employers, as we were in a time when sino-centrality, or being mandarin-speaking, was at a high.

This resulted in a trend of Malays starting at the bottom of the rung, because they perceived their value to be lower, either out of desperation or self-sabotage. We've all heard about that new non-Malay guy with less experience and credentials than you starting at a higher pay scale. It is after all a willing buyer-willing seller economy.

Because of a lower purchasing power, in order for us to start a small business on the side for example, we had to be picky with our budget. Malays, tend to help Malays, or so they said. And so, people charged building a website at $600 a pop. Some less.

I thought this was nuts. You're creating no value to the customer. All he got was a bunch of digital catalogue which produced nothing of value to his customers.

The market rate at the time for a simple static website, even those that are powered by a simple CMS like weebly is $3000. Yet there are people who spend labor costs at 5x less.

Tech companies, especially those that make websites for a living, are now competing on price. Who can make a website for the lowest price possible?

I found that being in the Malay community, people in charge of web-related projects perceive websites to be simple labour. A few years ago, I was asked by a government agency with a Malay-based project to build a website for them. As I was new and being that the project was not too complex, I priced myself at a rate that was reasonable. Not too high, not too low. Somewhere around the 6k-8k range if I recall.

The following year, they wanted a revamp. Expecting the price range to still be the same. The reality was, much of the requirements were considered complex. I informed that this project could easily go to the $40ks. A Chinese civil servant in the same meeting concurred with my ballpark to the disbelief of the Malays in the meeting.

They asked why is there such a huge jump in price? It's just a website.

But what most people don't understand is that building a website is labour. And there are labour costs. There are professional engineers who code to make your website, not just a website, but optimised to perform. There are professional designers, who design pixels that meet your customer's psychology and make them buy. There are server engineers that make your website software and hardware run and prevent it from being attacked and go down. There are sales, post sales, support, admin, all part of the entire labour cost that goes to make sure your website works.

While I was freelancing for a Malay web development company, we were invited to help a government university department to build their website. My colleagues typically price around 4k to 6k.

I hijacked the price pitch and gave them a ballpark of $19k.

The client didn't flinch. They expected that, but they still need to go within budget. My manager took me out of the price discussion. He managed to negotiate it down to $10k. That's 2x more than what we usually sell our services. My other colleague thought I was nuts pitching so high. But hey, it worked. Why? Because the requirements were urgent, and complex. If we sold it for less than $10k, it would have been painful for the company. We would be making a loss. Somehow my colleague didn't understand that.

While working for a non-Malay boss, our projects were priced much higher. We could even pitch for a retainer model and still keep a minimum headcount. I hardly missed a pay cheque. Even when times were tough, boss managed to pay me back.

Whilst working for Malay companies, there were some months I did not even get pay or pay was late, or pay was less. This affected morale and confidence. Why? Because pricing was wrong.

Pricing is everything to your business. Most people don't spend time to think how to price for your business. What makes sense? When is the price too low? What makes the price reasonable? How can we offer price plans that will entice them to buy and commit for longer, and re-purchase more.

Today, if you meet an agency, most start from $20k for a web project.

Of course there are others who might be cheaper. Yes they are, but they only code your site. They're not part of hosting your site. They won't manage your servers. And they won't debug for you after you go live and you changed something that made it broken.

Retainers start from as low as $1000 per month. That means that if you need the basics for managing your site, that's roughly how much you need to spend.

Can you manage the website yourself? Of course you can. If you have the time and the expertise. How many times have your WordPress site been hacked? What do you do when you get hacked? What happens if your website goes down?

That guy that sold you a website for $600 will not be able to help you.

Of course, living and running a company in Singapore, presents itself with a new set of problems. Anyone can run a Singapore company. Even foreigners. How many times have you heard from your customer that this Indian company can do their website for cheaper. Yeah, they tend to pitch for prices near the base level. That's because their entire development team is in India. If you lose a programmer, there'll be another one in the street with a BSc. in Computer Science ready to take over. Their costs are in Rupees. Not SGD.

When we pitch for projects, we found that some Indian companies will pitch at a price that we cannot match. But do we budge? No. Never budge. Never be enticed to price yourself lower than your worth.

Although I would prefer if the government set rules on pricing similar to how they made SP/EP start at a minimum salary. Similarly, to ensure healthier competition, the government should set minimum price points so that any company, whether local or foreign do not spoil the market.

But that's a story for another time.

At the end of the day, you get the customers you deserve. If you price too low. You'll get low value customers. If you price higher, you get higher value customers. Typically, the higher value customers are harder to please. But it is essentially that kind of mentality that will force you to produce better quality work. Otherwise, why price so high? You need to produce quality work.

Can the customer tell the difference between a $600 website and a $20000 website? Usually they can't tell at first. It's only visible after the website is launched and things start to fall apart. And it's through exactly that kind of pain that the customer learns.

Pricing is a science. You use data to determine price. For some help, sign up for newsletters at http://www.priceintelligently.com/ Read their blog. Learn how to price. Then after that selling gets a little bit easier.

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