Is the Lowest Price Always the Best Choice?

We worked over and above the written specifications and expectations, but when I told him it was time for a support contract to cover the costs of the ongoing changes, he found someone else that offered to do the “same” development work for ½ of our billable rate. 

At face-value, I can see why this was so appealing to my customer who is watching their pennies very closely, but I don’t necessarily agree with this thought process.  I do believe that you get what you pay for 99.9% of the time.

Software is not an assembly-line process, nor does it come with a fixed price for costs…I know that, but how do I retain a customer that is only looking at dollars and not what he’s getting in return?

When these situations happen, what is the best way to handle it?  In our case, we’re a software development shop, and our “product” is the code we produce and “service” is the customer support we provide. The “code” is something the client never gets to “touch” and doesn’t understand when he sees it. (Nor does he want to understand.) This fact makes it harder to “sell” my company as “better” than the other company willing to work for half-price.

Almost anything I say to him at this point can be perceived as me fighting for the business at any cost. So I need to be careful about how this is handled, to leave the door wide open for him to come back in the future without feeling bad.

I’d like to share with you the things that I did say and do, and I invite your comments on how I handled things.

The first thing I did was ask for information on the replacement person/company.  When I looked at their site, I found a Web developer/SEO/SEM person that works in the opposite technologies that are used in the customer’s system. (We’re a Microsoft house, and this new guy is all about WordPress and PHP.)

It’s important to know who/what I’m competing against.  Not that I can use this information (now) to try and retain the client, but it will certainly come up in future conversations.

Next, I communicated with the customer:

  • I acknowledged that this is a money issue and that I still respect him and care about his business.  I offered to help with the transition since I could tell he was ready for an argument and sales pitch – instead, I put him at ease by offering cooperation – and this opened his mind for further discussion.
  • I then gently explained to him that he’s moving from a 5-man development house working in the same office to a contractor working from home that is outsourcing the programming work. This will not get him his deliverables at the same speed that Palm Beach Software Design, Inc. delivers because this one person surely has more than one client, thus dividing his time AND attention.
  • I pointed out that in many cases, the person offering to do the work at a sub-standard rate is “possibly” still learning the basics, and willing to work for much less because it will take longer to complete the job. (But what I didn’t mention was the quality of the code – because the customer doesn’t understand the difference.) That will show itself over time, I’m sure.
  • Finally, I did clearly let him know that once the new person takes over, our company cannot be held responsible for his system any longer.  I had to say that, and make sure he acknowledged that.

In the end, he was still all about the price per hour…so I made it very clear that if things don’t work out as expected, that he is more than welcome to come back with no hard feelings on our part.

I’m actually pretty sure he will come back eventually, because I set such a high standard of professionalism at Palm Beach Software Design, Inc.  We are very sensitive to the response time for requests and changes, we are continually adding to our collective knowledge base, and our eye is always “on the ball” when it comes to using the latest and greatest technologies and programming practices.

At the end of the day, this is about the customer’s perceived value and his Return on Investment (ROI).  I’ve been doing this for 30 years now, and I know that it will take some time before he realizes (and hopefully) understands that although we charge more, we do the job better and faster, and in the end he is saving more money with us than using a less expensive “one-man show”.


What are your thoughts?  What else could I or should I have done in this situation?