Concise, practical guide to value pricing for design projects.
Notes
Pricing Methods
Cost-plus pricing is all about you; it doesn't take client into account.
Hourly pricing cons
• Clients tend to choose lowest rate.
• Clients want to know total cost up front.
• It's difficult to raise rates as quickly as your experience increases.
• You're incentivized to spend more time, but client is incentivized to get you to spend less time.
• Your income is limited by number of billable hours.
If fixed prices are based on hourly rates, they have same cons as hourly pricing.
Don't charge hourly to allow for shifting requirements or clients who can't make up their minds. Instead, define scope, then use value pricing.
Value-Based Pricing
Base price on value to client and the moment (e.g., how much you need work, how quickly client wants work done, how difficult client is to work with, etc.).
To help come up with price, think of what object you'd take for payment (e.g., new MacBook Pro, used car, 2 yrs of mortgage payments).
A Pricing Case Study
Offer 3 price options, often tiered.
Pros of price options
• Uses anchoring effect
• Causes client to compare your prices with your other prices, not with competitors' prices
• Forces you to think of ways to create value for client
Don't focus on your abilities or deliverables, but on results client can achieve.
Base each option on a different trait or result that's important to client, then sort into high, medium, low value.
Consider basing high option on 10% of potential value of engagement to client.
Options can be priced with different units (e.g., per phase, per month, fixed). It's OK that clients can't compare these directly to each other or to your competitors.