Freelancing is a tough business. It’s so competitive out there that some freelancers feel their only way of earning any money is to lower their prices to beat the competition. But, can this strategy ever work out? Who are the winners in the end?
Now, the idea behind this seems pretty obvious and it’s easy to see why it’s an attractive strategy to many freelancers out there. You’re a struggling freelancer trying every trick in the book you know to get work. Why try so hard, when you could just lower your prices? If you lower your prices so that you’re the cheapest, surely the client will pick you every time, right? So what could go wrong?
There are a number of reasons why cheap pricing and undercutting are not only bad for you, but bad for your client too. This practice is ruining the freelance industry for everyone involved.
No, this one isn’t set in a galaxy far, far away. The trouble with lowering your prices is that before long, the competition will do the same. Then what? Do you lower your prices to beat them again?
This, my friend, is a price war. And now you’re trapped in an unending spiral to the bottom. What happens when you get there? You’re stuck unable to cover your costs and make any money. Game over.
Undercutting, or predatory pricing, is in fact illegal. It’s a pricing strategy that creates a monopoly and prevents other new freelancers from gaining entry to the business.
It’s often difficult to prove, but if you’re found to be doing it, it’s illegal under competition laws and could put you out of business.
What it says about you:
If you’re good at what you do, why are you charging peanuts? There’s a lot of perceived value that goes into pricing. If you buy a pair of shoes for £10, your expectation is that they’ll be uncomfortable and fall apart before long. If you spend £100, you expect those same shoes to be much higher quality – they’ll fit like a glove and last for years.
The same rules apply to how you price yourself as a freelancer. If you’re cheap, clients will think you provide a cheap product. You may find good clients with interesting, well-paid work steer clear of you.
In contrast, you’ll attract clients who don’t care about the quality of the end product. Surely this type of work is a little demoralising.
Low prices, cheap product:
The more prices go down, the more clients perceive the value of the product to be cheap. This is bad news for everyone. This leads to clients expecting to pay as little as $50 for a logo design because they think logos are produced quickly and cheaply.
Really, it’s the freelancer’s duty to educate the client on just what goes into their craft and why the client should be happy to pay a bit more.
Like a rabbit in the headlights:
Clients often get blind sighted by price. In an ideal world, the client should hire the freelancer who is most suitable for their needs, regardless of price. If you go into the pitch shouting ‘I’m cheaper than everybody else in the market – hire me!’, the client’s focus is immediately shifted to price.
You should be selling yourself on the back of the fantastic quality product you can provide which will fulfil all your client’s needs. Not how cheaply you can do it. They’re focusing on price, rather than the fantastic end product they’re going to get.
This type of deal is bad for both parties. The client will end up with the wrong freelancer. And you’ll be stuck with a project that’s costing you twice what you’ll actually earn from it. It’s time to get real.