After 35 years of running a marketing business, I’m still worried about one thing. Margin! It seems and always has seemed to be a concept of deception: disguise the real price of your service to obtain benefits at the expense of your client. And customers don’t like it one bit!
Just take a look at the daily headlines. “The obscene profits on Wall Street continue to upset the public.” “Oil Company Profits Hit Record Highs While Consumer Suffering at the Pump.” “Big business profits are outrageous during the never-ending recession.” The average person doesn’t condone big business profits when they’re struggling to put food on the table, not to mention losing their homes to foreclosure.
So how do these companies make such huge profits? Pricemarkup is one way. Charging customers more than they paid for what they are selling. Is that fair? As an accepted business practice, apparently it is.
But in my experience with mostly small business owners, markup is a dirty word. My clients demand to know what I am paying for the services I offer them. They don’t seem to mind paying me a fair fee (translation: a very low price) for the services I provide out of my own resources. This includes creative services such as design, writing, composition, etc. advertisements, websites, brochures, etc. However, if I provide a service that involves a third-party provider for which I am charged a price, my customers want to know what that price is and not pay a penny more than me. Therefore, no marks are allowed!
That doesn’t give me much room to make a profit as the paltry charges for my creative services can hardly cover my overhead in this economy. But the ironic part of this is that the outside services I provide to my clients have also been hit hard by current economic conditions, not to mention stiff competition, the changing business landscape, and overall tough times, forcing them to reduce prices to a minimum. , making it virtually impossible for me to mark them.
If I am buying printing for a customer’s brochures, my customer can get on the Internet and glance at the average prices being charged by hundreds of national printers, all of whom are bidding against each other for the limited printing business which still exists on this Internet age. Then, when my client knows what price I propose to charge for his work, he can assess whether I have tried to deceive him and charge him a marked amount to make a profit.
I may pass up a small raise, but I feel like I have committed a crime against humanity and suffer enormous guilt for doing so. How dare I trick him into paying a small surcharge just to fill my wallet?! Where’s the justification in that, you’re probably wondering, losing respect for me in the process.
Well, I can make a case for why we have marked. On the one hand, it has taken me a lot of research to find the best quality and price; hours of careful and informed effort to prepare the document to meet the parameters of the service I choose to use; a lifetime of business experience to judge which printer to use and whether price should be the final determining factor in my decision; and finally, the risk of labor liability and loss of customers if the printer fails to perform its function satisfactorily. Yes, it’s my neck that’s on the line, not my client’s!
Time is money and everything I do for my clients takes a lot of time. Isn’t that worth something? Apparently not, for the majority of my disgruntled clients, who are struggling on their own with the same troubling circumstances! Nearly non-existent profits with increased overhead. It is not easy for anyone. So I don’t blame them for their suspicions and irritations. However, reality dictates that I must make a profit to stay in business.
While printing is one service that cannot support a significant markup, I offer many others that are in the same boat as well. Mailing lists and mailing services! Domain registration and website hosting! Stock photography! Advertising!… to name just a few. These are all services that have so much competition for that coveted limited business that they in turn can only charge a pittance for what they sell. So there’s virtually no room for me to charge a markup. However, the use of such services requires an endless investment of my time on behalf of my clients.
As? Let’s look at each one separately. My client wants to reach a certain segment of the market to present his offers. I need to get you a traditional mailing list or maybe an email list to reach out to that market. If the piece will be printed and mailed, I’ll have to do my best to list quantities that will be manageable within your print and postage budget and offer a return on investment given expected response rates. Then, with the help of a representative from the list, I begin the process of suggesting ways to reach our goal by addressing geographic constraints, industry sectors, commercial or residential targets, etc. This usually results in lists that are either too large to consider or too small to waste effort. The process then continues with the adjusted parameters to try to reach a viable resolution.
In the case of stock photography, my client and probably most of the world believes that I will do nothing to deserve a justification for a high price. However, there are hundreds of stock photo houses, all with different ways of using their services, not to mention choosing rights-managed and royalty-free sample files with strict regulations on usage and a lot of responsibility as a buying agent. And what exactly are we looking for? Is my client an expert at assessing what type of visual we need to present the right marketing image and communicate their message effectively? Usually not, so I’m in the picture to begin with. Then, trying to access the options available within a given topic requires skill in coming up with effective search terms, and concludes with having the aesthetic sensibility and marketing savvy to navigate through the endless possibilities, narrowing down the search to the few that may be considered the best ones to use… and then make the final decision, pay for it, and download a huge file to work effectively on your project. How many hours, days and years of my experience were used to perform this service? Uncountable! However, it is doubtful that you can add any markup. And if I do, it will have to be infinitesimal!
And that’s without taking into account that most of my clients prefer to try and take their own photos on digital cameras or cell phones that are sub-optimal and have poor resolution, requiring me to perform digital enhancement services to try and correct a multitude. of problems for which they hope that you will not charge them anything.
Domain registration and hosting services? These are so competitively priced today that companies are practically giving them away. (And in some cases…they are!) However, clients who need me to perform these services have no idea where to go, how much to pay, what’s available, what they need, what the decision entails, how long It takes doing the research, navigating the intricate websites, configuring the many aspects of each one to implement, keeping them up and running all year despite server issues I have no control over, etc… but they are sure of one thing. Your friend or family member has told you that you are being overcharged.
Finally, traditional media such as newspapers, magazines, radio and television eke out a living, offering advertising rates so low it’s embarrassing to report them here. And unlike domain companies, they can’t even give it away. So far the possibility of marking.
In the articles I’ve read about markup, accountants have discussed the concept of “markup.” This involves applying a certain percentage to your cost to ensure that you will generate enough revenue to cover your overhead and make a decent business profit in the process. How neat.
In my reality, profit margin is a concept I would throw out the window. I have to examine what prices the market will bear based on what my competition is charging and what my customer is willing (or able) to spend.
I’ve found that the best way to entice a new customer into a long-term website relationship is to offer free domain registration and hosting for the first year because after that it’s often too mind-blowing for them to try to be extracted. than what has been set up, especially if they fear that the success of their website may be in jeopardy. But this may not work for all customers and it’s important to stipulate a multi-year contract so they don’t opt out after the first free year.
I have also toyed with the idea of offering my creative services together with other services included in a package. But every customer’s needs are different and they still compare whatever price I quote to a price my competition may have quoted, whether we’re comparing apples and oranges or not. And, as I said earlier, if other services are expected, they want to know exactly how much I’m paying for those services.
You may wonder why I let my clients push me like that. When dealing one-on-one with a business owner who has entrusted him with all aspects of his business so he can strategize marketing solutions to your benefit, direct questions about pricing sometimes become unavoidable. Since I don’t consider my clients my adversaries, I try to be as honest with them as possible to build their trust in my judgement. Our collaboration and success together is the heart and soul of our business relationship. I cannot deny you the right to ask questions about cost. even if they are my Ultimate costs are bear costs
As for the markup, I don’t like how it makes me feel, but if I can get away with it, I have to try to apply it in whatever situation I can handle it, as unobtrusively as possible, fingers crossed that no issues will arise. It is part of business survival that every business owner must use and therefore understand. But to this business owner, he still seems deceitful and dishonest.