Why Are Websites Undervalued by Management?

By Pete Czech

Why Are Websites Undervalued by Management?New Possibilities Group

Be forewarned that this is a long post, but necessary…

I spend a lot of time thinking about the issues related to the business of web design and development. Not just from the perspective of agencies, designers and developers but how the medium as a whole compares to other assets that corporations build, maintain and utilize on a daily basis. I’m going to make a bold claim: digital properties on average are valued at a much lower level than nearly any other asset a company owns. I don’t mean for this post to serve as a series of reasons why management SHOULD value their website more than they do. And I definitely don’t want this to turn into a rant about the state of digital in the enterprise. But I do think it’s important to explore some possible explanations for why digital assets such as websites and applications are undervalued and perhaps jab just a bit at why this point of view is misguided.

First: The Problem

To start, I want to make sure that everyone knows that this is an opinion piece: your experience may differ. There are some agencies that are flying at so high an altitude that they may not experience any of these issues I’ll explore in a moment. However, the spectrum across where I see this undervaluation occurring spreads from small business to large enterprise, so I suspect that many other digital professionals are seeing these issues as well.

Over the last 10 years, I have seen the problem get worse. A couple of interesting stories come to mind... First, we can point to the CMO from a (past) client organization. This individual was brought in to manage the marketing operations of a firm that had already been in existence for quite some time but didn’t have a formal marketing strategy. We had been retained over the previous few years for website support, maintenance and content marketing services. When the new CMO came, they immediately pointed to budget pressures and other cost-saving tactics, relating that the company could not continue to pour such resources into their digital presence. In reality, this was a bit of an odd claim, in that the company was exponentially growing, acquiring new businesses and opening new locations around the world. In their first couple of weeks, this client posted more than a couple of Instagram stories flaunting business-class travel to Europe and Asia for “client meetings” and tradeshows. I’m not pointing out this story to say anything other than to ask – where are their priorities? Considering that this person was not speaking at those events, it got me thinking: what was the value of those initiatives? When the client left us because they wanted to cut costs further, they had taken their site from enterprise-hosting on Amazon to a shared host for $20 per month. Do they really take their digital presence seriously?

Another story I always love to tell is the example of the company that negotiated down our proposal for a $25,000 WordPress-powered custom web design. We had sat down in their conference room discussing goals, objectives and what they wanted their site to accomplish in relation to their competitors. The company, based on our research (and their admissions), has over $20M in revenue and has not utilized any digital capabilities to streamline workflows for customers. There is a goldmine of opportunity. At the 3rd meeting, the client indicated that $25,000 was way beyond their budget and that they were looking to spend closer to $10,000. Frustrated, I looked around the conference room. Long glass walls, multiple flat screen TV’s. The conference table sat 20 people and was built of some exotic wood, and the conferencing technology was top-notch. And, to top it all off, there were three terra-cotta warriors in the room that were over 6 feet tall. I know a thing or two about office build-outs and home improvement in general: this conference room was easily more than a six-figure project. Where is the ROI from that investment? Can it even be measured? And of the tens of thousands of customers they have, how many would ever even see it to be impressed?

One last example that I love is the CMO of a publicly traded company that I met with in NYC (I don’t mean to pick on CMOs exclusively – they just happen to be a typical client decision maker for us so we run into them a lot). Their office was in the vicinity of Times Square – easily an area where leases command $70 per square foot, per year, so I’m talking about premium real estate. We went in and met with a marketing manager – you know - the person underneath the CMO. After a generally productive hour of conversation, the CMO came in. He sat through the rest of what we said, about 5 minutes, while busily tapping away on his phone. Finally, he bluntly asked us to design their new homepage for free, and if he liked it, he would then work out a deal with us to build it. This is called “spec work”, wherein a client asks an agency for customized work product for free, before deciding on an engagement. View this popular comedic interpretation of the practice for more background. For this CMO, I suppose this seemed like a smart, efficient tactic. However, how could any agency produce anything of any value in relation to the client’s requirements without first performing some due diligence, discovery and architecture work? All the CMO proved was that he has no interest in a process to produce quality, goal-oriented work. Therefore, the value he assigned to the end product was relatively low.

While I have you, how about one final tale of digital undervaluation... I was speaking with a small business owner just last week about the progress of their website redesign. We are friends, so for me to help them would be a bit outside my comfort zone in terms of a conflict of interests. However, I did refer them to another agency who sent them a bid for their website. Their company has about $3M in revenue and is in the service industry. They have one major problem: identifying and converting new leads. During the conversation we first discussed a home improvement project he was undertaking. A new kitchen, two new bathrooms and some renovations to the family room. The price tag? A whopping $150,000. I kid you not – home improvement in our neck of the woods is insanely expensive. The topic then went to their website, which a year ago he started working on. He relayed this story:

“I received the quote from the agency you sent, but they wanted $15,000 for the work. One of my employees had a friend or relative, I’m not even sure which, who said they would do the work for much less. They started a year ago, and never did get finished. The project is kind of a disaster now.”

As the lingo these days goes... SMH (shake my head). What is the ROI in the long run of the kitchen and bathrooms which didn’t even NEED renovation? And what is the ROI of a website that drives you new, qualified customers? Whatever the ROI is, was the entire cost of the $15,000 website lost in missed opportunities from new clients? In each instance above, the company or those in charge of their digital projects simply did not value their digital presence. Is this wise?

Why, Why, WHY!?

The amazing thing about the internet that I tell many prospective customers is that it is a medium where the smallest players can compete with the largest. Regardless of the size of your company, everyone is literally a keyboard away from a billion customers. But, oh so few companies take it seriously. It’s almost as if no one really wants to, even despite all of the opportunity. 

So why is the digital medium so undervalued? Well, it’s hard to say, but I have a few theories. First, digital isn’t as tangible as a physical asset. Therefore, they don’t bring the same satisfaction or joy as a conference room, new kitchen, or shiny car. This is just a theory, as I stated above, but I find that there is some level of truth to it. You can sense value in physical objects. A cheap conference room table is just that – it’s cheap. A Ford drives differently from a Mercedes. And when it comes to services, even those that are fleeting such as business class travel... Well, there is a comfort that comes with drinking bubbly in a premium class while all the coach passengers board in the back. Digital production doesn’t make people feel good, it doesn’t necessarily scream of premium when you use it. Therefore, it’s held in a lower esteem. The only “experience” to speak of is the time you spend working with your agency. But, it’s difficult to sell agency services based on a spectacular experience when the divergence in pricing from one bid to another is so drastic.

Second, digital professionals themselves aren’t highly valued for their skills for a couple of reasons. First, no one understands what we do. Creativity is hard to value compared to other professions. As an example, no one doubts the expertise of a doctor, dentist, lawyer or accountant. Heck, even a hairdresser. And do you know what each of those professions has in common? They are all regulated. When you go to get a haircut, your stylist needs to have their license on display (at least, where I live). Government regulation and oversight makes it easy for clients, patients or customers to assign a value to their services. I’m not saying they assign a high value to all of those practitioners in all cases – clearly a haircut should cost less when compared to a root canal – but the fact that the services provided are regulated and have some level of oversight allow for the service recipients to place those services at a particular level of skill. In the digital world, there are few certifications that are impartial, no regulation. Many folks advertise that they can delivery X, Y, and Z when they really can’t. Furthermore, so many people have a “nephew who can do it for much less”. Finally, services are being price pressured by practitioners from around the world – almost every website owner gets solicited daily by developers and designers from India, Russia, and China. The fact is, digital professionals are somewhat misunderstood, undervalued and underappreciated as expert practitioners. The lone exception that I've seen to this rule are those that develop financial-based software or other in-house platforms where the software or assets provides a business advantage, therefore being of high value to the organization. Technicians on those platforms are valued and oftentimes hard for companies to even retain as employees.

Finally, people just don’t get the scale of the work involved. As such, it’s easy to undervalue the end result. Custom web designs can take hundreds of hours to produce. The process of understanding, designing, developing, migrating content and then deploying a website can take practitioners from different disciplines many hours of work. It isn’t unusual for custom web applications or mobile applications to take thousands of hours of production work. However, customer’s simply don’t value that. The mathematics of custom digital production work in relation to the overhead of running a digital agency makes a custom website in the budget area of $5000 nearly impossible. An agency of 20 people in a mid-sized metropolitan area is most likely looking at $80-$100 per hour of billable time to simply stay profitable. To make a profit, plan for rates 25-50% higher. If a custom website takes 300 hours to build between design and development, and the hourly rate is at a minimum of $100… Well, there is your $30,000 project and the mathematics behind it.

Most clients who have not worked in the digital space can’t comprehend the amount of time it takes to develop these projects. And, the advent of mobile devices has made website design and development even more time-consuming. Now the testing and development work that goes into every application or website is more resource-intensive, resulting in even higher price points.

I’m sure at this point there are designers reading this who think this is crazy. “Please. I DEFINITELY can produce a website for less!” Well, maybe you can. But, are you really performing each part of the project at an expert level? Do you have experience driving results in each area? Can you support the application after it is deployed in an enterprise-ready SLA-methodology? In my experience, most lower-tier players are not able to answer those questions.

How You SHOULD Value Your Website

The most frustrating thing about the undervaluation provided to digital assets is that the value is actually pretty easy to calculate. After all, the performance and output of digital properties are 100% trackable and traceable. Digital ROI is an easy calculation if you know what you are doing. It simply takes a math exercise.

Let’s say you are selling widgets online… To do so, you need a few components. First, you need a website that can handle a transaction. Without a worthy destination, no marketing campaign is worth running. Secondly, you’ll have to create some campaigns that can drive traffic to your shop. Finally, you need all of these moving parts configured so you can collect and analyze analytics. With the analytics in place, every part of your digital business can be tracked and all of your orders can be traced. This means that you can easily calculate the number of items sold, the profitability, and track how many orders per visits you are generating. Utilizing those metrics, you can then sharpen the saw, as they say, and drive better conversions via a variety of design or technical changes. As the changes start to bear fruit, it becomes even easier to assign a monetary value to them. Unlike so many other physical assets, figuring out the value of a well-oiled machine on the web is easy. How does one figure out the ROI on a $100,000 conference room? Or sending your CMO in first class to a conference in the French Riviera? Good luck with that.

What should you compare your website to? I always tell people two things. First, your website is a preview of what working with your company is like. So, make a good first impression, whatever the cost is you can bear. Secondly, think for a minute what the value of this hypothetical employee would be:

  • Works 24/7/365
  • Takes zero vacations
  • Provides customers with answers on demand
  • Attracts new customers by being knowledgeable
  • Converts new customers via skills and education
  • Represents your company perfectly, all of the time
  • You can control and moderate the messaging they distribute in each conversation

How would you assign a value to that? Well, look at what your best salesperson is paid. Because that is a pretty good indicator of the potential value of your web property.

Wrapping Up

I apologize for this rant...! Like I said, the web, in general, is a playground where anyone can compete with anyone else. It’s what allows niche players in various industries play with titans. How many shoemakers are now ripping off AllBirds? How much did the sale of Dollar Shave Club net the ownership? Yet, despite this potential equality within the medium, most people simply don’t care enough to compete. They don’t want to invest in the results. The short-sightedness of the immediate budget impact is too big a burden to overcome, therefore making it difficult to focus on long-term successes.

Ready to dabble with investing more into your digital world? Find areas of impact where ROI can be measured. And, upon success, keep going for more growth and opportunities. There is always something that can be improved upon and drive positive results. But, don't be the person who calls an agency looking to build the next eBay on a $5,000 budget. It ain't gonna happen!

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