Justify the cost of developing the site and protection from dumping
Hi, Habr. Today I want to talk about the problem faced by the absolute majority of young studios and agencies (and not only young ones, in fact) - about the justification of the cost of developing an Internet project to the customer and protection from dumping by competitors. I hope this information will find its practical application and help you create projects at a decent price.
Speaking about the cost of creating a site, you need to start by determining its internal cost in the company itself. Until now, many studios operate at fixed rates (business card site - XXX rubles, online store - YYY, etc.). But, one way or another, all agencies sell the time of their employees, and the definition of cost should be based on this factor.
The customer buys the time of producing employees (designers, developers, content contributors, etc.). He is not ready to pay for the time of the PR-manager, accountant, cleaning woman. Therefore, the estimated estimate for the project is repelled, as a rule, precisely by the cost of hours of “producing resources”.
')
Let's see what share these resources occupy in the total pool of company spending. For a small web-studio (specializing in development, not advertising, there are purchasing budgets and a slightly different distribution) of 15 people, the distribution of expenditure items, as a rule, looks like this:
It is clear that these are medium ranges, in some companies they may vary. It is also important to note that with the growth of the company, the share of payroll funds of service and management personnel will grow.
What do we see? Production resources account for about a third of the company's total expenses. Thus, in order to go to zero, the hour of a specialist, which costs 1 ruble, we need to sell to the customer for 3 rubles (and this is without taking into account the downtime and sales lags that always happen). Thus, the coefficient by which we multiply the bets of our fighters K = 3. Add here the minimum rate of return - and get K = 4 .
For larger studios and agencies that work with a higher rate of return and put in risk, the coefficient can increase dramatically up to the K = 7 indicator.
Often, the customer does not understand how the initial price is obtained, which the studio exposes to him. But, as a rule, he normally understands business. The story about the pricing model described above and the K-factor (and this can be explained at a meeting in 5-10 minutes) removes all the questions, and further discussion is translated into a much more understandable plane of labor costs and resource costs.
I strongly recommend using this arithmetic whenever it comes to “ Why is it so expensive? "
This price-justification scheme works great as a backhaul. Everyone was faced with a situation where the customer says: “ And another company offered us to do the same for 100 thousand rubles, and yours are several times more expensive ”.
OK, let's unscrew the formula in reverse order. As we remember, for an operating company with a small staff of K = 4.
“ What is a corporate website for 100 thousand rubles, let's calculate ” - we say to the customer. A typical corporate site is (at a minimum!) 2-3 weeks of designer work, 3-4 weeks of development work and layout, and a couple more weeks for content, testing and project documentation. Total it turns out about 2 man-months of work. As a rule, the customer does not argue with this.
We continue. If the company has put you 100 thousand in price, then the cost of a man-month will be equal to 50 thousand rubles. Now let's see how people will work on your project. We divide 50 by K = 4 and get a salary equal to 12,500 rubles per month .
After this calculation, all questions are usually removed. Any adequate person understands that either people will work on his project without any qualifications at all (as applied to Moscow salaries), or they simply want to be deceived on labor costs and will do the project in three days on his knee.
Now let's talk about the types of dumping and how to protect them. First you need to decide on the term itself. In this article I will mean the following situation under dumping:
Dumping - when a company from the same segment, with a similar weight in the market, staff and client portfolio, exposes the price much lower than the market price (costs + profit rate from 15% to 50% of the cost price).
Those. when you are a big agency and set a price of two million for a site, and a small regional gang of 5 people puts 200 thousand - this is not dumping, both companies set a “fair” price. But if this situation occurs with “equal” companies, then the second one is already dumping.
And one more rule. Protection against dumping, one way or another, implies some discussion of a competitor’s offer with a customer. In this matter, one should never show emotions, respond sharply negatively and throw mud at a competitor. Only pure analytical rational arguments. No emotions! Otherwise, you simply put yourself in a bad light both in front of the client and in the market.
The easiest kind of dumping is when your competitor, at the request of a client, easily gives a large (from 30%) discount on a project - thereby avoiding you at a price.
Let's see how to protect against such a strategy. The same pricing method works well. Having quickly identified it to the customer, we can say that in our market the rate of profit averages about 25% of the project cost (referring to the opinion of more reputable people and companies, experts). Thus, giving a substantial discount to the project, the competitor will either work at zero or loss (which means that the project will be given lower priority, or the company has a cash gap or a problem with sales - which is bad for the customer in both cases). Or - a competitor initially overestimated the price, laying the opportunity for a subsequent discount - which also shows it in a negative light to the client.
This situation occurs quite often and is not in fact dumping. It happens that the previously well-known brand has "sunk" and is experiencing difficulties - the staff has decreased, they have recruited less qualified employees. But due to the inertia of the market, it is still remembered as a "cool company." Accordingly, this competitor exposes a “fair” (for its current situation) price lower than yours, and in the eyes of the customer you, as a company, look odianoko.
From the point of view of protection, in this case it is necessary to leave the price discussion plane (both companies set them up honestly). Extremely neat, very diplomatic, we must try to convey to the customer the idea that the competitor is no longer a cake, and that the company is in a recession now (be sure to give some intelligible proof links, otherwise it will just be muddling). In this case, it is better to try not to make any value judgments of your own. And even better - if the customer gets this information altogether from third-party hands.
This is another common situation that I have repeatedly encountered in practice.
A simple example. year 2009. Tender for a complex multi-component project with a large amount of functionality, integrations, etc. We calculate the detailed estimate (more than 30 stages of work), the Gantt diagram and other design pieces. The cost is about 5 million rubles. We come to the meeting, present. The customer is clear, he is delighted with the detail, plan and other things.
But, says the customer. All this, of course, is good, but your competitor XXX offered a price two times lower - 2.5 million rubles. And however much we like your thoughtful approach, “two times is two times.” How so, I think. XXX is a company from our segment, we have similar indicators, similar pricing. I would understand if the price differed by 30 percent, but twice? Something must be done, otherwise the tender is lost.
Ok, I say. Tell me, are you sure that our competitor outlined everything that was described in your TK? How many points are their estimates? Of the three (design, development, implementation) - the customer is responsible. Well, we say - you yourself said that our breakdown into stages is steep - so ask the competitor to calculate the estimate again - according to our detail. The customer agrees (and why not?). After a couple of days, the settlement comes from a competitor - and the final offer is even higher than ours. Curtain, winning the tender.
Let's see what happened. The competitor specifically limited himself to the general stages of work, without specifying any details on the functionality. He hoped that by winning the tender, the customer would have no other options - and along the way, the contractor could inflate the estimate to real values ​​and prices.
Accordingly, the method of protection is simple - offer the customer to calculate with the competitor dumping the full details of the project (which you can provide) - and this will immediately remove all questions.
This is the only option of dumping, to which I am not negative, and I myself resorted to it in practice. This option is possible when you are approached by a very large, “tasty customer”, who has a huge potential and scope of work - with some small local task. For example, a company that rolls Hollywood movies in Russia. For each film - a promotional site. Sometimes several pieces per month. Large work front, good checks, a steady stream of orders. Very large customer. And he appeals to you with a local task - to help make one small site, because his current contractor has done something. And it is so important for you to sell this first project and “enter the client account”, that you are ready to make it at least for free - in the future you will more than compensate for this with other orders.
And here it is quite possible to offer the customer a discount. The only point (and extremely important) is that you should assess your chances that this order will not remain single, to calculate the risks correctly. And only after that give any discounts. Of course, it is better not to resort to this technique without special need.
Of course, within the framework of a small material it is impossible to describe all the subtleties and possible situations, but I tried to grasp the main thing. And, as usual, the discussion in the comments is often more interesting than the material itself =)
Perhaps you will also be interested in our other materials on Habré about marketing, sales and customer service studios / agencies:
Sincerely, Andrei Terekhov - www.ruward.ru .
Cost calculation
Speaking about the cost of creating a site, you need to start by determining its internal cost in the company itself. Until now, many studios operate at fixed rates (business card site - XXX rubles, online store - YYY, etc.). But, one way or another, all agencies sell the time of their employees, and the definition of cost should be based on this factor.
The customer buys the time of producing employees (designers, developers, content contributors, etc.). He is not ready to pay for the time of the PR-manager, accountant, cleaning woman. Therefore, the estimated estimate for the project is repelled, as a rule, precisely by the cost of hours of “producing resources”.
')
Let's see what share these resources occupy in the total pool of company spending. For a small web-studio (specializing in development, not advertising, there are purchasing budgets and a slightly different distribution) of 15 people, the distribution of expenditure items, as a rule, looks like this:
- FOT of employees - 50%
- - Producing resources (30%)
- - Managers, support and administrative staff (20%)
- Conventional fixed costs - office rent, stationery, consumables, food, equipment, etc. - 15%
- Taxes - 20%
- Marketing and advertising - 15%
It is clear that these are medium ranges, in some companies they may vary. It is also important to note that with the growth of the company, the share of payroll funds of service and management personnel will grow.
What do we see? Production resources account for about a third of the company's total expenses. Thus, in order to go to zero, the hour of a specialist, which costs 1 ruble, we need to sell to the customer for 3 rubles (and this is without taking into account the downtime and sales lags that always happen). Thus, the coefficient by which we multiply the bets of our fighters K = 3. Add here the minimum rate of return - and get K = 4 .
For larger studios and agencies that work with a higher rate of return and put in risk, the coefficient can increase dramatically up to the K = 7 indicator.
Often, the customer does not understand how the initial price is obtained, which the studio exposes to him. But, as a rule, he normally understands business. The story about the pricing model described above and the K-factor (and this can be explained at a meeting in 5-10 minutes) removes all the questions, and further discussion is translated into a much more understandable plane of labor costs and resource costs.
I strongly recommend using this arithmetic whenever it comes to “ Why is it so expensive? "
Justification of the price to the customer - reverse reception
This price-justification scheme works great as a backhaul. Everyone was faced with a situation where the customer says: “ And another company offered us to do the same for 100 thousand rubles, and yours are several times more expensive ”.
OK, let's unscrew the formula in reverse order. As we remember, for an operating company with a small staff of K = 4.
“ What is a corporate website for 100 thousand rubles, let's calculate ” - we say to the customer. A typical corporate site is (at a minimum!) 2-3 weeks of designer work, 3-4 weeks of development work and layout, and a couple more weeks for content, testing and project documentation. Total it turns out about 2 man-months of work. As a rule, the customer does not argue with this.
We continue. If the company has put you 100 thousand in price, then the cost of a man-month will be equal to 50 thousand rubles. Now let's see how people will work on your project. We divide 50 by K = 4 and get a salary equal to 12,500 rubles per month .
After this calculation, all questions are usually removed. Any adequate person understands that either people will work on his project without any qualifications at all (as applied to Moscow salaries), or they simply want to be deceived on labor costs and will do the project in three days on his knee.
Types of dumping and protection
Now let's talk about the types of dumping and how to protect them. First you need to decide on the term itself. In this article I will mean the following situation under dumping:
Dumping - when a company from the same segment, with a similar weight in the market, staff and client portfolio, exposes the price much lower than the market price (costs + profit rate from 15% to 50% of the cost price).
Those. when you are a big agency and set a price of two million for a site, and a small regional gang of 5 people puts 200 thousand - this is not dumping, both companies set a “fair” price. But if this situation occurs with “equal” companies, then the second one is already dumping.
And one more rule. Protection against dumping, one way or another, implies some discussion of a competitor’s offer with a customer. In this matter, one should never show emotions, respond sharply negatively and throw mud at a competitor. Only pure analytical rational arguments. No emotions! Otherwise, you simply put yourself in a bad light both in front of the client and in the market.
Discount dumping
The easiest kind of dumping is when your competitor, at the request of a client, easily gives a large (from 30%) discount on a project - thereby avoiding you at a price.
Let's see how to protect against such a strategy. The same pricing method works well. Having quickly identified it to the customer, we can say that in our market the rate of profit averages about 25% of the project cost (referring to the opinion of more reputable people and companies, experts). Thus, giving a substantial discount to the project, the competitor will either work at zero or loss (which means that the project will be given lower priority, or the company has a cash gap or a problem with sales - which is bad for the customer in both cases). Or - a competitor initially overestimated the price, laying the opportunity for a subsequent discount - which also shows it in a negative light to the client.
Dumping "sagging" competitor
This situation occurs quite often and is not in fact dumping. It happens that the previously well-known brand has "sunk" and is experiencing difficulties - the staff has decreased, they have recruited less qualified employees. But due to the inertia of the market, it is still remembered as a "cool company." Accordingly, this competitor exposes a “fair” (for its current situation) price lower than yours, and in the eyes of the customer you, as a company, look odianoko.
From the point of view of protection, in this case it is necessary to leave the price discussion plane (both companies set them up honestly). Extremely neat, very diplomatic, we must try to convey to the customer the idea that the competitor is no longer a cake, and that the company is in a recession now (be sure to give some intelligible proof links, otherwise it will just be muddling). In this case, it is better to try not to make any value judgments of your own. And even better - if the customer gets this information altogether from third-party hands.
Incomplete Dumping
This is another common situation that I have repeatedly encountered in practice.
A simple example. year 2009. Tender for a complex multi-component project with a large amount of functionality, integrations, etc. We calculate the detailed estimate (more than 30 stages of work), the Gantt diagram and other design pieces. The cost is about 5 million rubles. We come to the meeting, present. The customer is clear, he is delighted with the detail, plan and other things.
But, says the customer. All this, of course, is good, but your competitor XXX offered a price two times lower - 2.5 million rubles. And however much we like your thoughtful approach, “two times is two times.” How so, I think. XXX is a company from our segment, we have similar indicators, similar pricing. I would understand if the price differed by 30 percent, but twice? Something must be done, otherwise the tender is lost.
Ok, I say. Tell me, are you sure that our competitor outlined everything that was described in your TK? How many points are their estimates? Of the three (design, development, implementation) - the customer is responsible. Well, we say - you yourself said that our breakdown into stages is steep - so ask the competitor to calculate the estimate again - according to our detail. The customer agrees (and why not?). After a couple of days, the settlement comes from a competitor - and the final offer is even higher than ours. Curtain, winning the tender.
Let's see what happened. The competitor specifically limited himself to the general stages of work, without specifying any details on the functionality. He hoped that by winning the tender, the customer would have no other options - and along the way, the contractor could inflate the estimate to real values ​​and prices.
Accordingly, the method of protection is simple - offer the customer to calculate with the competitor dumping the full details of the project (which you can provide) - and this will immediately remove all questions.
Dumping first appeal
This is the only option of dumping, to which I am not negative, and I myself resorted to it in practice. This option is possible when you are approached by a very large, “tasty customer”, who has a huge potential and scope of work - with some small local task. For example, a company that rolls Hollywood movies in Russia. For each film - a promotional site. Sometimes several pieces per month. Large work front, good checks, a steady stream of orders. Very large customer. And he appeals to you with a local task - to help make one small site, because his current contractor has done something. And it is so important for you to sell this first project and “enter the client account”, that you are ready to make it at least for free - in the future you will more than compensate for this with other orders.
And here it is quite possible to offer the customer a discount. The only point (and extremely important) is that you should assess your chances that this order will not remain single, to calculate the risks correctly. And only after that give any discounts. Of course, it is better not to resort to this technique without special need.
Conclusion
Of course, within the framework of a small material it is impossible to describe all the subtleties and possible situations, but I tried to grasp the main thing. And, as usual, the discussion in the comments is often more interesting than the material itself =)
Perhaps you will also be interested in our other materials on Habré about marketing, sales and customer service studios / agencies:
- Client service in web studio
- Subtle places in the contract for the creation of the site
- Typical mistakes made by studios on their own sites
Sincerely, Andrei Terekhov - www.ruward.ru .
Source: https://habr.com/ru/post/169559/
All Articles