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Alternative pricing strategies creatives should consider

SUMMARY

1. Hourly rate
2. Fixed fees
3. Recurring pricing
4. Value-based pricing
5. Competitive pricing
6. Tiered pricing
7. Luxury pricing

Choosing the right kind of pricing strategy depends on many factors such as your offering, your schedule, your competition and your target audience.

As a creative, you are probably familiar with hourly pricing or fixed fees. These pricing mechanisms are easy to calculate but may backfire in challenging situations. There are variants outside these standard options that you should consider. They have their pros and cons being aware of them allows you to determine the right type of pricing models for your kind of work.

Hourly pricing

Designers give an hourly fee and paid by the hour. Keep a detailed description of the work done throughout the duration of the project. This pricing strategy helps you convince your client that she/he is only paying you for the work done. If they had a ballpark estimate, remind them of the running cost.

Pros & Cons

  • You are paid for your time.
  • Protects you from budgetary overruns
  • Allows you to terminate the contract when it is no longer suitable for you.
  • You get paid after the work is completed
  • Difficulty for you to predict your revenue forecast

This strategy is useful when

  • Client have a limited budget and requirements are not defined
  • Client is exploring design ideas (open-ended project)
  • Client is looking for custom-made designs

Fixed fees

Designers give a fixed price for the project. Have a personal breakdown of the time needed for the different phases of the project. Fixed fees help you schedule your work efficiently, deliver the project on time and profitably and prevent over-commitment to the project.

Pros & Cons

  • Easy for you to predict your revenue forecasts
  • Allows you to identify your best offering to focus your marketing efforts
  • Hard/impossible to increase budget in the end
  • The amount of work required for the project may be more than the fee offered (unprofitable contract)

This strategy is useful when

  • You have previous experience in delivering a design project of similar scope
  • Client requirements are defined.

Recurring Pricing

Designers charge a regular fee regularly over the length of a project.The challenge is to establish and maintain a relationship with the client. Consider this strategy to be like their in-house/personal design consultant without the commitment.

Pros & Cons

  • Highly predictable revenue forecast
  • Do not require clients to pay upfront
  • Unclear expectations and sudden changes to the scope may increase your workload without the getting paid for
  • A constant level of commitment to the customer over the length of the project

This strategy is useful when

  • You have other design services to offer them in the future
  • The client will need more design services in the future.

Value-based pricing

Designers charge a price based on two factors. 1) what difference you can offer compared to your competitors and 2) your the client’s value perception of this different proposition you have to offer. The challenge is gauging how valuable they see this difference and how significant this difference is to them.

Pros & Cons

  • Great opportunity to increase your revenue potential
  • Successful value-based pricing projects increase leads to potential projects
  • Cannot predict project cost
  • The first offer needs to be as accurate as possible

This strategy is useful when

  • Clear set of deliverables to which designers can both agree from the start
  • You can estimate the scope of work and breakdown of hours accurately
  • You will need to be certain of the lowest fee you can offer without making a loss.

Competitive Pricing

Designers offer a price based on the competition landscape. Check that your offering communicates clearer than your competitors. When clients are researching for designers, they will be able to see how your price has more to offer than your competitors.

Pros & Cons

  • Clients looking for designers will know your fees are suitably priced
  • Difficulty researching what your competition has to offer and at what price
  • You may make a loss if you set a price based on your competitors

This strategy is suitable when

  • You can adjust other aspects of your business to make this a profitable pricing option.

Tiered Pricing

Designers offer a base product/service and add on features for clients to customise. Be careful you are not creating a choice overload for your customer. 3 or 4 additional features will suffice.

Pros & Cons

  • Easier for you to upsell your services
  • The scope of works may cost you more than the price of the feature

This strategy is suitable when

  • When you are trying to diversify your portfolio into other design services

Luxury Pricing

Designers charge based products/price based on prestige. The challenge is communicating the benefits of choosing this luxury over the regular pricing. What extra service/experience do they get? Will they be part of a VIP community?

Pros & Cons

  • Great opportunity to increase your revenue potential
  • Allows you to explore high-end design projects
  • Luxury products/services require more investment and commitment, which may prove unprofitable
  • Clients may question your regular pricing approach

This strategy is suitable when

  • When you have a strong brand
  • You are selling your service to your loyal followers
SUMMARY

1. Hourly rate
2. Fixed fees
3. Recurring pricing
4. Value-based pricing
5. Competitive pricing
6. Tiered pricing
7. Luxury pricing