When I first started my IT business, I set a table in the back of my in-laws store in the evenings when I got off work from my day job. When I came in, I would pull out a table, put my signs up, and run my power cords. At the end of evening, I would put everything back up. I had this setup for roughly two years and it worked well. I learned a lot during those first two years but nothing more important than my customers.
I had a lot of great customers during those years but I also had some that were challenging to say the least. I’m sure you all have had customers like this (or if you haven’t, there is still hope that you won’t). After my first two years, I renovated a old shop behind the store where I had set up my table. Up until this time, I had not changed my prices for services and I had deliberately priced myself under my competition. I thought at the time that if I undercut them, I could grab customers from them and I would be competitive. I was wrong. While I did get business, I got more than my share of difficult customers. Customers who were concerned only with getting the lowest price and would even price shop to see how low they could get the price. I call them price shoppers.
As a general rule, there are two different kinds of customers, residential and commercial. Also speaking generally, some rules apply to both customer types and other rules are more general to each category. For example, my customers when starting out were residential but they were a specific kind of customer. Most of them were the price shoppers, meaning they were more concerned with price and getting everything they could for that price. I understand we all have budgets and do not want to pay exorbitant fees for shoddy work, but here I’m not talking about those that want to pay a fair price for a good product or service. I’m talking about those customers that demand the world for $50. I know a lot of WordPress products and developers get this as well, especially when it comes to no-cost plugins. When they don’t get the world as they expected, they become difficult customers and are more likely to negatively influence other potential customers. This same concept applies across the board in both residential and commercial customers. Just like you have price shopping residential clients you have price shopping commercial clients. The result is generally the same when they don’t get the world.
What I didn’t realize when I first started out is I could control the customer types that walked in my door, or up to my table. Even though I would alway do my best for the clients and improve their experience through customer service, it wasn’t until I adjusted my prices to cover the added cost of my new office that I realized that my customer type had changed. I was no longer the lowest priced provider on the street and therefore no longer getting the price shoppers that I once did.
I’ve raised my prices several times since then to position myself closer to the upper range for my services in the area which has netted the effect that I wanted. One point I would like to suggest to you as a IT professional or web developer/designer though is that if you raise your prices, you need to ensure you provide a quality service and quality product. If your service or product is poor and you are charging too much you will get a bad reputation. If you are just starting out, I would recommend that you do a survey of other companies in the area. Call them and price check. Though some people frown on this, I say it’s just business. You want to position yourself about in the middle of the range if you’re just starting out. Also, be sure that you do no do pro bono or free work starting out – see my other post as to why. You have to be in that sweet spot to get the right customers.
Speaking of the right customers, have you determined who your target market is? Price has a lot to do with that. Don’t price yourself out of your target market but also don’t be the bottom of the barrel.