Someone else is cheaper

The "butter story" is one way to overcome pricing reduction requests

Ford Harding relates some really effective responses when a prospective client tries to push down the price for professional services.

In a blog entry from last May, he writes:

Maurie Fulton, a rainmaker who gave me my first job in consulting, knew his field cold and, just as important, knew his clients. Through years of negotiating fees, he was familiar with every ploy that clients would use to get our fees down and had effective counter ploys for all of them. Whenever a prospective client would try ploy, he would real off his standard response with such grace and confidence that the clients would usually move on to another subject without further comment. Here are a few client ploys and Maurie’s counters:
Client Ploy: Someone Else is Cheaper -- Counter Ploy: The Butter Story
On hearing our fee, the client would say that they were talking with one of our competitors who would do the work for less. “So, why don’t you use them?” Maurie would ask, sensing this was just a ploy. Not expecting this question, the client would say that the competitor couldn’t start as quickly or didn’t have quite as much experience as we did, and Maurie would respond with his butter story. “It reminds me of the woman who told the grocer that the store down the street sold butter for half his price. ‘So, why not by it from them?’ countered the grocer. ‘Because he’s out of butter,’ said the woman. To which the grocer responded, ‘Lady, when I’m out of butter I sell it for half off, too.’”

More recently, Harding relays a communication from Glenn Mickle, a consultant with accounting firm Morse Group in Australia:

I have recently started with a regional accountancy/business advisory firm in NewSouth Wales, Australia as their marketing manager after a previously successful career in wedding and portrait photography. I see many parallels. Very busy staff coupled with downward pressure on fees from a competitive market.
In my previous career the first question was often “How much does it cost to have a family portrait taken?” My response “Far and away the cheapest way to do it is to take it yourself.” Then I would be quiet. The next question was usually “Well actually we’d like you to take it because we’ve seen what you can do.” This is OK once you have established a reputation for good work. Much like Maurie’s “Let me help you find someone cheaper” story, there is always someone cheaper. I would also sometimes hear ‘The guy down the road does free sittings.” My response: “Well he’d have a better idea than I would as to what his skills are worth.”
The question of ‘How much?’ is often a way for the client to appear in charge of the situation and for them to appear knowledgeable on the subject. If we find other ways for them to show their knowledge (for example, asking them what their preferences or priorities are and what they’d like to get out of this transaction) they forget about the price and start to focus on the value they are after.
I’m reminded of another hint given to me some years ago which I think fits nicely into your discussion. Here’s what to do when asked one those prickly questions like “Why does it cost $XXX?” Instead of getting on our soapbox and rattling off the many virtues of our products, skills and services blah, blah, blah, our response should be along the lines of “Why do you ask?” Then we find the real reason for the question, which might be “Well last year it was more expensive and I wondered why it was so cheap!”

If you have confidence in your abilities, and are delivering genuine value, you do not need to be the "low bidder". And you shouldn't.