7 pricing models – and which you should choose | Creative Bloq

7 pricing models – and which you should choose · 01. Hourly pricing · 02. Project-based pricing · 03. Retainer pricing · 04. Value-based pricing · 05 ... Skiptomaincontent CreativeBloqARTANDDESIGNINSPIRATION Search Subscribe DesignMagazineSubscriptionsDesignMagazineSubscriptionsWhysubscribe?Exclusiveinsightfromtheworld'sleadingcreativesTryasingleissueorsaveonasubscriptionIssuesdeliveredstraighttoyourdoorordeviceFrom£7.75View Xmasmagdeal News Howto Features Buyingguides Magazines ImagineFX 3DWorld Events Vertex BrandImpactAwards Webinar trendingGraphicDesignDigitalArt3DAdobedealsWebDesignWebinar CreativeBloqissupportedbyitsaudience.Whenyoupurchasethroughlinksonoursite,wemayearnanaffiliatecommission.Learnmore Pricingyourcreativeanddesignserviceseffectivelyisadifficultbusiness.Afteryouhavecalculatedyourshoprate,youhavea baselinenumberforallofyourpricingcalculations.Usingthisnumber,youcan determinewhatittakestocompleteaproject.Todoso,you'lluseoneofsevendifferentpricingmethods.Whetheryou'reafreelancerorlargeagency,thereisnosingle'rightway'to priceyourservices.Instead,lookforthe'idealway'toprice.Mostcompanieswillusetwoor threedifferentmethods.Exclusiveoffer:Save15%onAdobeCreativeCloudnowUseyourpastexperienceandestimationexercisestodeterminehowmuchtimeandeffortisrequiredforeach project.Lookattwoorthreemodelstofindtherightoneforeachsituation.And sinceyourminimumprofitisalreadycoveredbyyourshoprate,youhavemuchgreaterfreedomto saynoto badpricingsituations.Clicktoseefull-sizedimage01.HourlypricingHourlypricingisoneofthetwomost simplemodels.Thekeythingsyouneedforsuccessfulhourlypricingisdiscipline,documentationandcommunication.Itrequiresgreaterscrutinyoftheprocess,whichoftendoesn'tfosterclienttrust.Hourlypricingonlyworkswhenyouhavegooddata.Youmustmeticulouslytrackyourtimeandexpenses,andconsistentlycheckinwithyourclient. Thisapproachisidealforfreelancerswhoaren'tdirectlyworkingwiththeclient–forexample,afreelancerforanadagency.It'salsoidealforanyworkinvolvingsophisticatedtechnologysuchasappdevelopment,wherethingsoftengowrong.However,itisn'talong-termsolutionformostcreativesunlessyouchoosetoremainfreelance.Youwillonlybecomemoreprofitablebyraisingyourrates,whichhasaceiling.Tosummarise,hourlypricingisagoodoptionif:You'reworkingregularlywiththesameclient,onsimilarworkTheproject'sdeliverablesareunclearProjectscopechangedseveraltimeswhenmeetingwiththeclientYou'redoingcomplextechnicalwork02.Project-basedpricingThesecondofthesesimplemodelsisproject-basedpricing,whichcanbeusedin tandemwiththehourlymodel.Project-basedor'flat-fee'pricingisthemostcommonmodel.Someoneasksyouhowmuchawebsitecosts,youtellthem$4,000,andyouchargethem$4,000regardlessofthetimeorcostinvolved.However,withthismethodweoftenunderestimatetheeffortrequired,andendupwithexcessivechangesorunexpectedproblems.Thismeansaloss inprofitoranawkwardrequestfor a budgetincrease.Project-basedpricingcanbeprofitable,andit'sasteptowardvalue-basedpricingandhigherprofitlevels.If youdosimilarworkforsimilarclientsroutinely(e.g.WordPresswebsitesforrestaurants),youcancutcostsandincreaseprofitwiththisapproach.Itcanalsoworkwellifyou'regoodattimeestimates,butmostofusaren't.Youwanttousethisapproachif: Theclientasksaboutmoneyalotup-frontIt'sclearyoucangettheprojectdonefasterthantheclient'sestimateWhatyou’repricing:Pricingpackagesdon’thavetobefordeliverables,theycanalsobeusedforthingslikeworkshops03.RetainerpricingAretaineristheclosestthingtoaregularpaycheck;it'sapre-setandpre-billedfeeforatimeperiodorvolumeofwork.Thiscanbebasedontime–forexampletheclientagreestobuy100hourspermonthat$100perhour,foratotalof$10,000.Alternatively,itcanbebasedonvalue.Inthiscasetheclientmightspecifythefeaturesordeliverablestheyneed,andpay$10,000permonthforthiswork,regardlessofexactlyhowlongittakes.Therearetwotypesoftime-basedretainers:rollinganduse-it-or-lose-it.Inarollingretainer,clientsrolloveranyunusedhourstothenextmonth.Inause-it-or-lose-itretainer,anyunusedtimeislostandthebalanceresetsthenextmonth.Don'tofferrollingretainers;you'llendupdoingmeaninglessworkjustsoyourclientcan burnthroughthehours.Youwillfindamaximumhourlyrateaclientiswillingtopay.Value-basedretainersenableyoutoscaleyourskillsinsteadofyourtime,whichmeansyoucanincreaseyourprofit.Ifyoucanreducethetimeittakestoproduceachunkofcode,youarenolongerpenalisedfortheincreasedefficiency.Youarepaidthesameamountregardlessofhowlongthejobtakes.04.Value-basedpricingValue-basedpricingcallsforalesstraditionalclientrelationship.AtNineLabswecallitgrowth-drivendesignandourclientsloveitThecruxofvalue-basedpricingisensuringtheclientissatisfiedtheypaidforwhattheyreceived.Twoclientsmaypayadifferentpriceforthesamework.Buttheyaren'tpayingyouforyourtime;they'repayingyouforsolutions.Andthosesolutionsareworthmoretosomeclientsthanothers.It'sdrivenbycustomerdemandandtheirwillingnesstopay.Thestrategyisbasedonthreecomponents,whichwe'lllookatnow.WhatyourmarketwillbearConsiderthelimitsofbothyourlocalmarket(whereyoudobusiness)andyourhorizontalmarket(whatyoudo).Youcangetgranularanddefineyourmarketas'customlogodesignsforconsumerbrands'.Youneedtofindoutwhatyourcompetitionischargingforsimilarworkwithclientsofsimilarsize.Sohowdoyoudothis?Ask:You'llbeshockedathowmanypeoplewilltellyouGowheretheclientsare:Insteadofnetworkingwithothercreatives,gotoclienteventsandtradeshowsandaskthemwhattheypaidGetinvolved:Gotoconferences,jointradeassociations,andsitinroundtablesandtalkaboutpricingMonitor:SetupalertsforfreelancepricingguidesandpricingsurveysYourtrackrecordYourpastexperiencewillaffecthowmuchyoucancharge.Ifyouhaveextensiveexperiencewithaparticulartypeofclient,technologyorstyleofdesign,thenyoufallintothe'expert'category.Expertscanchargemorefortheirservices.Clientsseethathiringyoumeansthatthey'remorelikelytoget desirableresults.PerceivedvalueOftenyou'llbecalledupontodetailhow yourworkis'worthmore'totheclientthantheworkofothers.Therearewaystoquantifyvalue,butthementalityhastochangefromwhattheclientvaluestotheclientvaluingyouandyourexpertise.Thismeansyouhaveto demonstrateexpertise,competence,andtheabilitytoquicklyunderstandtheirproblems.05.PackagepricingPackagepricingcangetabusinessupandrunning,butitcanalsoresultinyourservicesbeingviewedasacommodity.Puttingyourpricesoutfrontbeforeyou'veanalysedtheclient'sproblemputsyourneeds(money)abovetheirs(effectivesolutions). You'veremovedtheabilitytofindpainpointsandaddressthemdirectlybecauseyouhavefittheirproblemintoyourprocess.Ifyourpackagepricingincludesdiscoveryandanalysis,thatwon'tbeasbiganissue.Herearesomeexamplesofdifferentpackagepricingoptions:Brandpackage:Alogo,websiteandbusinesscardsatonefixedpriceTemplatecustomisation:CustomisedwebsitethemesforWordPressConsultingworkshopsanddayrates:AimedatpublicorprivateaudiencesAnalysisorreviews:Analysisofexistingprojectsatafixedcost,includingareportPhotoshootsandvideos:AcertainnumberofshotsoramountoftimeYoucanalsoofferpriceranges(forexample,'CMS-basedwebsitesrangefrom$5,000to$20,000'),orconsiderminimumprojectcosts.'Projectsstartat$10,000'indicatesyouwillnotacceptprojectsthatarelessthan$10,000.06.Performance-basedpricingValue-basedpricingandperformancepricingaren’tthesamething,here’sthedifferencePerformance-basedpricingmeanstobaseyourfeeontheperformanceofyourwork.Youmustaffectameasurableoutcomeforyourclient,suchashigherrevenueorincreasedefficiency.It'softentiedtoanalytics,soit'scommonwithweborapplicationdesign,andwithadagenciesandSEOexpertsthatcanmeasuremediaimpressions.Youmusthaveabulletproofcontractwithclearmetricsandclearterms–ifyoudon'thavelegalsupport,don'tusethismodel.Itcanresultinpowerfulworkingrelationshipsthatcloselyalignthebuyer'sgoalsandtheseller'sgoals,creatingtheultimatebondbetweenyou andyourclient.It'snear-impossibletounder-priceyourself,aslongasyourmetricslineup.07.EquitypricingYoumaybeofferedastakeinabusinessinexchangeforyourwork,eitherinlieuofanycashpaymentorasamixofequityandareducedcashpayment.Thisapproachisgoodforsideprojectsorsmallengagements,butnotifyou'regivingupalargenumberofcashbookingsorclientsandyouneedthemoneynow.Successdependsonwherethecompanyisatthetimeyougetinvolved.Ifithasn'treceivedanyoutsidefunding,yourownershipcouldbedilutedonceitdoes.Ifithas,you'regoingtobeofferedlittleequity,probablylessthan5percent.Ifthecompanyisfundedbutcan'tofferyoupartialcash,it'snotworthitunlessyouplantogoandworktherefull-time.SummaryMoneycanbemessy,butitdoesn'thavetobe.Thekeyistoavoidgettingemotionalaboutpricing.Notwoprojectsorclientsarethesame,andtherehastobeamethodtothemadness.Thesooneryougetcontrolofyourpricingstrategy,thesooneryou'llfindprofitability. Relatedarticles:ThebestChristmasgiftsforgraphicdesignersThisgraphicdesigner'spricelistispricelessThebestlaptopsforgraphicdesign2017 BradWeaver BradWeaveristhechiefexperienceofficeratNineLabsinAtlanta,GA,andtheauthorofCreativeTruth.Heroutinelyspeaksatconferences,actsinmovies,andsolvesUXproblemsforFortune500brands. 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