A well-known commodity good that lots of producers sell to lots of buyers for a standard price.
Merriam-Webster defines it as:
A good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price
The market assumes that a commodity good from producer A is just as good as the one from producer B. Therefore, buyers tend to buy from the producer that offers the lowest price.
You must be wondering what the heck all of this has to do with UX agencies. Bear with me just a second.
UX Design is a Commodity
Suppose a skill is widely known in an industry, sold by many sellers, bought by many buyers, and standardized, i.e., taught in schools. In that case, its quality is regarded as equal regardless of offers it.
This is the case with UX design. There are dozens of free and paid programs, certifications, and degrees one can get to become a UX designer. There’s a great demand for it, but there’s also plenty of people offering it.
This puts UX design in the category of commodity. Its price will be roughly the same regardless of who sells it and will tend to be low because there’s a lot of competition.
The Problem With Low Hourly Rates
As a client, if you go on a site like Upwork and search for UX agencies, you’ll need a way to filter among the hundreds of results. So what you do? You filter by hourly rate.
This makes UX agencies think that having a low hourly rate will make them more competitive, attract more clients, and help them make more money.
You can’t out-compete everyone on price, for two reasons. One is, there’s always someone willing to do it for less. Two is, you’ll end up working 80 hours a week to make ends meet.
Lowering your hourly rate will only put you on the same proverbial page of results as those willing to charge dirt-cheap prices. It’s a race to the bottom.
Yes, you might attract more clients. But they’ll be the wrong type of client looking for the cheapest option. You’ll have more work, but you’ll make less money.
How to De-Commoditize UX
As a small, firm being competitive and profitable long-term is a 3-variable problem. The variables are:
- High Quality
- Low Price
You can only optimize for two out of the three variables.
If you offer high quality at a low price, eventually, you’ll burn out. Your low margins will force you to take on more work than you can sustain. It will affect your mental and physical health.
You can offer low prices, as many bottom-feeders in Upwork do, however in order to remain profitable in the long run, you will have to sacrifice quality.
Lastly, the route I recommend for small UX agencies is to offer high quality consistent at a high price. This is by far the most profitable option and the most satisfying as well.
If you want to break out of the commodity game, you need to offer great quality at a higher price.
Wealthy Clients Prefer A Higher Price
This might seem counter-intuitive, but raising your prices filters out bad clients and attracts good ones. I’ve written about bad clients before [here]. #K
As a client, If a problem is making me lose money, and I have the budget, I want to work with the best specialist to solve my problem.
Let’s say I have to decide between two UX agencies to help me fix my onboarding flow. Both have comparable relevant experience and seem professional, but one of them is almost 30% more expensive.
Guess what, if I have the budget, I’m going to hire the most expensive option. Why? Because a higher price tells me they only work with a certain level of clients. It tells me that they value profitability over quantity. Frankly, it just makes me feel like they are the better option overall.
Leverage Your Content Strategy
Of course, you won’t attract the clients with the right type of mindset and budget if your online presence is all over the place, or worse, you’re nowhere to be found.
We live in a world dominated by content and search results. The better your content strategy is, the easier it’ll be to find you.
You have to make sure your online content aligns with the type of clients you want to work with and the kind of work you want to do for them.
Choose a Niche
In terms of content, yes, quality is important but more so is specificity. You need to choose a niche and direct all your content to that niche.
Let me give you an example.
Imagine you’re a client that has an app for purchasing tickets to online events. You are looking to hire a UX agency to fix the usability of your mobile checkout flow. You have two options:
We area a UX agency offering web development, SEO, logo design, branding, web design, graphic design, business card design, mobile app development, online marketing, social media ads, and community management for small and large firms in fintech, healthcare, automotive, food & beverages, construction, blockchain, AI, and architecture.
We a UX agency, and we help businesses audit and improve the usability of their mobile app checkouts.
Who are you more likely to call?
I’m willing to bet not only you would call Option B but that they also would be able to find a solution to your problem way faster than Option A ever could. Even if Option B is the most expensive one, it is far more likely they are worth the higher price.
When budget is not an issue, we tend to favor specialists.
The fastest way to be perceived as a specialist is to create highly specific online content sharing your expertise.
The right type of content cements your authority in a particular subject, establishes your credibility, and attracts the right type of clients.
You can position yourself as the best option for a specific problem by carefully crafting your online presence in a specific niche. When you are the best option for a particular situation, price stops being an issue. Higher prices mean less work but more overall revenue and profit.
Chose a niche, create content around it, raise your prices, and live a happier life, running a more profitable UX agency.