The Vendor Death Spiral: Could this be why you feel constant price pressure?

Positioning in professional services is not permanent. It’s a current state that results from accumulated decisions, most of them small, and it can move in either direction. It takes constant oversight and effort to keep a position.

The direction most independent professionals don’t see coming is downward, because the movement is gradual and each individual step seems defensible. This is the dynamic I describe in Chapter Three of Better Clients. Higher Fees. as “the vendor death spiral”. It isn’t a single catastrophic decision. It’s a series of reasonable-seeming ones that collectively redefine how the market categorizes you.

The framework in Chapter Two provides the diagnostic context. The value curve maps three levels at which independent professionals operate and it matches how clients engage with them.

At the lowest level is the vendor. Vendors execute orders, respond to specifications and compete on price because they have accepted, consciously or not, that what they offer is interchangeable with what others offer. They are evaluated on cost because they haven’t given the client a basis for evaluation on any other dimension.

At the middle level is the solution provider. These are competent professionals who address defined problems. They receive reasonable compensation and reasonable respect. Most independent professionals plateau here, and it’s a serviceable position. It is not, however, where the most interesting and best-paid work happens.

At the top of the curve is the trusted advisor. This is the person whose counsel shapes client decisions. They aren’t presented with specifications; they’re consulted before specifications are formed. Their fees reflect the value of that influence. They don’t compete on price because comparison isn’t the relevant frame. In fact, they often set the budget for their clients.

The movement between these levels is not a function of expertise. A technically superior consultant can operate as a vendor indefinitely if their behavior signals vendor-level positioning. The signals are specific and consistent. Responding to RFPs (“It’s a numbers game!”) you didn’t help write signals vendor positioning. Discounting before the client asks signals vendor positioning. Being too eager, overexplaining, being available 24/7 - all scream “I’m a vendor!”.

These aren’t intuitive failure modes. Most of them are things independent professionals do because they believe it’s what professional behavior looks like. Being eager, being available, doing free work “favors” - these are seen as virtues in other contexts. In the context of advisory positioning, they communicate something the practitioner likely didn’t intend: that they’re available to anyone who asks at whatever price they will pay.

The RFP question is worth addressing directly because it generates the most resistance when I raise it with clients. The conventional wisdom in consulting is that RFPs are a necessary business development channel. My position, which is argued in detail in the book, is that responding to RFPs you didn’t help write is almost always a waste of time. The winner of most competitive RFP processes is the firm that was in the room when the requirements were written. The other respondents are providing competitive cover that the issuing organization is legally or procedurally required to collect.

RFP’s attempt to “level the playing field” which is the last thing you want. You want the playing field as slanted in your direction as possible. The client thinks they are comparing apples to apples. By standardizing the solution - all that’s left to evaluate is price.

Refusing to participate in that process is a positioning decision. It communicates that you operate at a level where the comparison-shopping framework doesn’t apply to you. Some prospects will find this off-putting. Good. You don’t want them as clients. The ones who understand it are typically the ones whose work is worth doing.

The death spiral begins when you make a decision based on short-term revenue pressure that sends the wrong categorization signal. It accelerates when that decision is repeated. It becomes structural when the client has incorporated your vendor-level pricing into their budget model and their internal description of what you do.

Reversing it requires the same patient commitment in the opposite direction: a series of decisions that gradually recategorize you in the client’s perception. In an existing relationship, that process is slow. With new prospects, it starts at the first contact and the positioning is yours to set.