Advice point: The lowest development quote is rarely the best quote
When We Are Apps was still developing apps rather than advising clients and developers on best practice we went through a phase of trying to increase our development rates. Our accountant had told us we weren’t charging enough.
You try telling any business in a competitive market that they must put up their price. It’s not an easy thing to hear or indeed understand – surely, we would lose opportunities and pitches if we were more expensive?
How did we fix this? By realising that pricing has to be fair to both parties. For this reason, you should never try to nail to the floor the guy you want to do great work for you. Let me explain.
Pay peanuts, get monkeys
In order to try and increase our development rates to a level where we could run a great business yet not put off potential clients with fees that were too high, we engaged a sales psychology expert (get in touch if you’d like to be put in touch with him after reading this).
He explained that clients that weren’t prepared to pay enough usually lost out in the end because the teams they engaged weren’t prepared to do enough.
Naturally, that made sense to us, but it didn’t ring true within our own team because we had been over-delivering for the amount we were being paid. Month by month we were losing more and more money. Obviously, that could only continue as long as we had enough money to, in effect, subsidize our customers.
So how did he get us to understand that customers needed to know why they needed to pay a fair price, and not just the best price they think they could get?
The Value See-Saw principle
The psychology expert took a piece of paper and a pen and drew the picture below.
He explained that, in this instance, the client was getting too much work for too little money. This was not sustainable, so the developer would eventually go bust.
Then he drew this picture.
Now the customer is being charged too much and the developer is doing too little work. Eventually, the customer will run out of money and the developer will no longer have a cash-cow client.
You might think this a great for the developer, getting lots of payment yet never having to complete a project, but actually, it’s a terrible business model as finding new clients each time is very expensive and increasingly difficult if you don’t have completed case studies to show how good your work is. Good teams develop an excellent working relationship with customers so they can continue to work with them, constantly improving their app product.
It was clear that neither scenario worked. So the consultant drew a third picture.
This time there is an equilibrium between the parties. The developer is not being asked to do too much work for too little reward and the client is not asked to pay over-the-odds for an inferior service. The sales expert called it the Value See-Saw.
We instantly saw the value to both client and developer. From that moment on we priced our projects so that both parties got the maximum value for participating in the project.
Ever since then, whenever we presented a development quotation and the potential customer started to haggle, we brought out the pen and paper and asked the client where they would like to be on the see-saw.
You probably know the answer, right?
But what is the best ‘value’ price?
So now you may be asking yourself how do I make sure I know the price I’m being asked to pay is neither too high or too low and that I’m getting the best value price?
Get three quotes. It’s as simple as that. Complete an app briefing project form, give it to three development teams and you will get an indication of where each might be sitting on the value see-saw.
Because you will have a detailed briefing to discuss, you can even sit down with them and explore why their pricing is either higher or lower than you think it should be, given that you have two other comparable quotes.
This is something you may want to do when a developer has come in with a wild quote that normally you would just disregard from the selection process, but the chemistry tells you they would be great to work with so it’s worth interrogating their pricing model more.
Complete an App Project Briefing form to send to a developer here.