Should You Lower Your Design Fee?

Design business consultant Ted Leonhardt shares a story about being contacted by  a corporate procurement person after he thought the project was signed off on. Being asked to lower the firm’s fees could have derailed the entire project, but Leonhardt explains how he handled this tricky situation.

 

We won the assignment in a competition with two gigantic management consultancies and a global branding agency, an odd combination of competitors. And it wasn’t on price either.

Ted Leonhardt

The kick-off took place two week earlier. We’d met the whole client team and just had the first scheduled weekly presentation where we clearly demonstrated our mastery of the assignment and had shown real progress—when this email arrived:

Hi John,

My name is Judy Smith and I’m with Alpha Group’s procurement org, and I work with Larry and the Charge-It team on their contracts.

I’ve taken a look at your fees for the brand/product design. They’re just a bit higher than we usually pay, so I’m wondering if we can talk/consider together how to lower these rates a bit.

Also, we notice your firm is billing the same amount ($195/hr) for a Principal and Senior Associate – normally we’ve found that a senior associate rate to be lower than the principal rate, so… I’m hoping we can discuss this too.

Email or phone is just fine – I’m mostly available today and Wednesday if that works for you.

Thanks!

judy
Judy Smith J.D., LL.M.
Senior Contracts Administrator
Global Innovation Team
ALPHA GROUP

Shivers went down my spine as my stomach made a full turn. Recovering a bit I thought, what’s this? We’re doing this job! Are we going to get paid? We’ve just put in two intense weeks of work. What happened?

After asking Chuck, the senior associate, what he thought, I picked up the phone and called my client, told her about the email and asked if she could help me with this? She sounded very uncomfortable, even a bit evasive, “John, you’ll have to deal directly with Judy on this.”

“But, we have the assignment, right? The team seemed in agreement that we were on track and making good progress. We’ve been working with you for two weeks. Do you know Judy Smith? Why is a lawyer involved? Don’t we have a deal?”

“Just call Judy, John. I’m afraid I can’t get involved.”

Two weeks in and purchasing rears its ugly head. What now? Call Judy Smith, that’s what. Then a voice from the back of my head, “No, don’t call her. Send an email and set up a time to meet.” So I penned…

Hi Judy,

Just read your note. Chuck and I will be in your offices all day tomorrow. Could we get a few minutes to meet to discuss your concerns?

John

I hit send, hopping for the best.

Then I printed out Judy’s original email to study and made a few notes:

  • Seems like artificially friendly language.
  • Judy is a procurement lawyer assigned to the Charge-It team.
  • Not just a lawyer, but a lawyer with an advanced degree: LL.M.
  • She seems to be comparing our fees to others, but whom?
  • The comparison of Principal to Sr. Associate is clear.
  • Seems like she’s looking for any leverage she can get.
  • Email/phone is not fine. Must deal with this in person.
  • Her title is Senior not VP or SVP, just senior. Some power but not total power.

Feeling better I talked it over with Chuck and we decided that we’d take the following approach:

  • Tell Judy that we only discuss fee issues in person.
  • Meet with her together so she’d see that we are qualified professionals.
  • Explain that Chuck leads our product design team and I lead the branding team. The difference between us is that I’m an owner, he’s not, but there is no difference in the value that we bring to the project.
  • Explain that we set fees based on feedback from our clients. We’re fully engaged so we take that to mean that our fees are acceptable.
  • We know that our competitors charge two to three hundred dollars an hour. At one ninety-five we’re a bargain.
  • We’ve found that when a consultancy lowers its fees word gets around, respect suffers and so does the project.

Finally, we’ve found results matter, not the fee.

Chuck and I felt good about our position. Better yet, Judy replied, setting up a meeting the following afternoon. “Come to eighth floor reception and my assistant will get you,”

We arrived and had to wait forty minutes . When we were ushered into Judy’s office she was sitting with her back to the windows with the bright afternoon sun blinding us.

Feeling confident, I thought, “just another trick.” First the wait, now this. Why the games?

I must ask for what I need here. “Judy, could you lower the blinds or could we move to another room.” We moved, we talked, she asked again for lower fees. We politely declined. She sent the signed purchase order the following week.

So what was this all about? We had the job. She had no leverage. We learned later that ALPHA GROUP’s policy is to always ask consultants to lower their fees. And guess what, about twenty percent of the time they get the fees lowered.

Ted Leonhardt has provided management consulting and negotiation training exclusively to creative businesses since 2005. He cofounded the The Leonhardt Group, a brand design firm in 1985 and sold it in 1999. In 2001 and 2002 Ted served as Chief Creative Officer for Fitch Worldwide, out of London. In 2003 through early 2005 Ted was president of Anthem Worldwide, a brand packaging design group.

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2 thoughts on “Should You Lower Your Design Fee?

  1. Jane Pellicciotto

    Wow, is all I have to say. Not wow to being asked to lower your fee. I’ve been asked that a few times. Once, I actually had the composure to ask two questions: was this request based on a specific budget they had in mind? (Answer: No) Was this price being compared to a similar firm’s proposal? (Answer: No)

    Just by my asking these 2 questions in a completely non-defensive way shined a light on how ill placed her request was. She told me to keep the original fee.

    I’m sure your takeaways are that you should stand your ground and respect your work, look at the situation objectively, and insist on meeting in person.

    But I have 2 questions. Would the client be comfortable with you exposing who they are or is it a made up name? Why did you feel comfortable working with a company that started out on a rather untrustworthy course?

    I guess you took the high road, but the story leaves me feeling weird.

    1. Ted Leonhardt

      Hi Jane, The company is a highly trust worthy organization that operates globally. They have an active purchasing department who’s job is to just keep expenses as low as possible. Yes, the challenge to one’s fees always leaves an uncomfortable feeling. And it takes away some of the good feeling that the project starts with. But, the whole transaction comes down to just doing business. I’ve got a story in mind on the subject of those feelings, just haven’t typed it out yet! Ted

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