Discuss: Pricing Strategy for Creatives
by Jason Blumer
- Editorial Comments
2
A great article and something which is very much at the forefront of my mind at the moment (as someone who runs a small digital outfit).
An issue i’ve got though is that many potential clients want some idea of costs before you move forward – I mean, they need some kind of ballpark – are we taking £1 here or £1M? Simply saying “it depends” can look evasive. I try to counter this by explaining my process which typically kicks off with a ‘discovery’ phase.
Discovery is important to me because it’s during that (billed) phase that you really get to the nitty gritty of what the client is after. And if opportunities get thrown up then I want to be in a position to suggest them and not have the client think they were included from day 1.
Perhaps you’re describing your discovery phase above – if so, I’m hoping it is billed?
Also, I’m guessing you’ll do some internal per hour project tracking to make sure you did end up breaknt even?
Thanks – love these kind of articles!
Joel
posted at 11:54 am on January 31, 2012 by Joel_Hughes
3 A combination
We have found that starting out the relationship with a service based contract and then moving into an hourly relationship is what works well for us. It takes time for clients to trust you and desire for you to put as many hours into the project as necessary, but once you have, your relationship can flourish with an hourly setup.
posted at 12:24 pm on January 31, 2012 by level2d
4
Can we not call ourselves creatives? It makes it sound like I’m a thing, like a toaster or something.
posted at 01:03 pm on January 31, 2012 by TheBadger
5 I'm with Joel.
We also charge for discovery on bigger projects (anything we assume will be over $5k). We spend a lot of time in discovery before we design/develop and want to know that everyone is on board with the decisions we’ve made and why.
Do you charge for discovery, or do you roll it into the overall project total?
We are oddballs in that we only charge hourly. I’ve never had a project not change drastically from concept through completion, and by charging hourly, our clients feel like they have the freedom to make changes without having to go through change-orders and rewriting specs. It’s worked well for us, so far, and we have great working relationships with our clients.
I’m always on the lookout for new/better approaches to the initial proposal phase of a project because I really think it’s so important to structure it well to set expectations, establish trust and perform due diligence – but it gets complicated.
posted at 03:08 pm on January 31, 2012 by BigSea
6 Good stuff...
These are good points. Let me address a few…
@godgeez You make a good point. Billing by the hour tends to hide the value of your work. In that, when you do necessary research, they can’t see that work directly in a deliverable, but it certainly added value to the overall web project. So, instead of billing by the hour, we can price all up front, bring transparency to our prices and give our customers a choice of what they want us to do for them. In your up front price, add in research, show it to the customer, and have the conversation with the client of it’s importance. It’s better than hiding it with an hourly rate and surprising the client later.
@Joel_Hughes Def, customers want an up front estimate. I would say don’t give them an estimate, give them an EXACT price up front. And while you’re at it, guarantee that it will NOT change (unless they submit a ‘change order’ for more/different work). Does that scare you? You totally add value to your relationship with the customer when you give a firm price up front. But, remember, when you do that you add such value, that you can offset the value you have injected into the relationship on guaranteeing an up front price that you can price your services MUCH higher than you currently do. It’s a risk balance, really. You balance the risk of offering an up front firm price to the customer (which is best for them) with a higher price on your end (which is best for you). It’s win-win. Essentially, your price now includes an amount for your work, an amount for the guarantee of your services, a guarantee of an up front price, etc. In the article, I noted that you can price for more things than just design. One thing you can use to price your services higher is to price away the customer’s fear! That is, take away their fear of ‘Joel sure is doing a lot of work, how much is this going to cost me?’ Take that fear away and price for it. When you ‘price everything up front’ you do such a service to your customer. They are more at ease through the project, you have had all of your difficult price discussions and the customer doesn’t have to worry about any ‘surprises.’ But if you do this (upfront pricing), you MUST price MUCH higher than you currently are – I would say by 50% higher. It takes longer to sell up front, but all the while you are being forced to build relationships and that is so good for your business. And, no, we do NOT track any time internally. I fundamentally disagree with pricing my knowledge, experience and expertise by an arbitrary hourly rate. I think it is flawed and I disagree with it on principle. We know we have made money by looking at our financial statements (we don’t need hourly rates). And we know we have taken care of the customer when they say they are happy and send us referrals.
@level2d I have to disagree with you here. You can implement processes at the beginning of your relationships with your customer to create trust between you. If I can’t get my clients to trust me BEFORE we begin a relationship, then they are the wrong client for our firm. If you are ever basing your value to your customer based on how many hours you spend on anything, then you are leaving freakin’ money on the table, big time. You’ll have to get off of the hourly rate TOTALLY to see what I mean (or go through my Creative Coaching Course online). If you want your relationship to flourish with your client, AND you make more money, then stop billing by the hour.
@TheBadger What would you like to be called?
posted at 03:10 pm on January 31, 2012 by Jason Blumer
7 @BigSea
Yes, we charge for EVERYTHING, including discovery, design, implementation, and training afterward. All of it can be done through value pricing, not hourly billing.
And you are correct, our projects change too. We price in stages, which is one way to manage the pricing of each engagement. Actually, breaking your work up in to smaller stages is a strategic to price each part in creative and strategic ways. It is easier for you to manage, easier to price and you slow the client down through the whole process so you can take better care of them.
Hopefully some things mentioned in my post above addressed some of your concerns as well.
Great comments from all! Let’s have more discussions… these pricing discussions are very deep and actually pretty hard to implement!
posted at 03:15 pm on January 31, 2012 by Jason Blumer
8 Sometimes, time is money
As, sometimes, time is money, the rule of not pricing/charging by hour cannot be a golden rule.
On the different ways of working (after agreeing to work, not while still meeting and finding out if we both are a good fit) with a client, one of the services I offer is to work next to & with them (ie. in situ, in-house), and solving particular problems or explaining things, or helping them figuring out stuff. This meetings are usually a mix of consultancy & real, tangible work.
For example, when doing maintenance-related work (ok, it may not fit into “creative” work, I admit), it could be a mix of analysis/talk on how to improve page usability and apply some SEO-related stuff, and then, doing the work (editing pages, content, HTML, CSS, images, whatever) not just next to them, but with them.
I’ve found this way of working to be good both for them & me. They are happy to “guide me” on what has to be done (“change this, add/remove that, let rethink this text together, etc”) on their website, and have it done there, instantly, that is, without having to wait for me to give them a quote, and an estimated time of delivery.
So far, the only way I’ve found to measure fairly this kind way of working together is by the time spent together.
So I usually set a fee that decreases over hours. First hours costs $XX, second hour a little less, third hour even a little less, and from then on, the hourly rate gets fixed.
posted at 03:51 pm on January 31, 2012 by Julián Landerreche
9 Time Is Money but ...
I have been charging by the project for years. I spend time discussing the project with clients and then tell them exactly what the costs will be. A good deal of this comes from the fact that I’ve done it for years and I know how to factor in costs for additional programming charges etc once the scope of the project has been discussed. That does include everything, including discovery.
One thing to note. I always ask the client what their budget is. Pricing is about value and perception. If the client thinks it’s a $7500 project and you were thinking $3500 why leave money on the table? Meet in a middle ground and make them happy. The market and your experience and reputation are what drives pricing. Don’t sell yourself short!
posted at 05:32 pm on January 31, 2012 by Jack McDaniel
10 That would be 5$ to move that button
Interesting article, but after reading all of it, I must say that is hard for me to agree.
We are now completely shifting from the pay-for-service model to an hourly charge, the total opposite of what you suggest. Since the adoption of hourly bills, I’ve seen the most happy customers ever. They need to be free to grow their project if they notice the added value.
I’m feeling confident with this model since I can see the value of every hour spent in a project, even just talking. Did someone ever like when the charge didn’t correspond to an actual job? This doesn’t feel right to me.
Finally: we see that many clients really think about their website/app/whatever over and over, hypothesizing every kind of change. Do you refuse when they ask for little changes? Do you say: “that would be 5$ to move that button to the left”? You probably don’t. But in this case, be ready: more requests are on their way.
Nah, it’s just too unclear to me. We are not selling goods. We are hiring out our knowledge and skill. I find it a matter of honesty and simplicity to bill by the hour.
posted at 05:51 pm on January 31, 2012 by fornace
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1
Great read. When I was starting off with web designing, I thought of charging per hour but as I started designing more and more sites it struck me. We shouldn’t do that. While designing a site, I refer to good sites, better coding styles, new trends, in between the project so that I could integrate them as well and if I were to charge per hour, it’d have been very difficult to make the clients understand the whole process behind the research. So, even I think that charging per project is very sensible and logical as it gives us the room to do our research and deliver at our best.
posted at 11:45 am on January 31, 2012 by godgeez