Comments on Pricing Strategy for Creatives

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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.

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  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!


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  3. 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.

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  4. Can we not call ourselves creatives? It makes it sound like I’m a thing, like a toaster or something.

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  5. 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.

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  6. 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.

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  7. 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!

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  8. 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.

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  9. I found this article interesting, having been thinking along similar lines myself recently. However, I’m having trouble imagining how I’d apply this to small requests relating to existing projects (minor updates / tweaks / feature additions, etc), which make up a significant chunk of what I do from day to day. At the moment I quote for the number of hours that I estimate the job would take. I’d be interested in any suggestions for a non-time-based way of pricing jobs like these, mainly because it would be great to be able to reduce the amount of time I end up spending trying to estimate how long things will take.

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  10. Great article, that convinced me to change my pricing policy.
    Is it then dispensable to make your daily time report? I think no. Time reporting is still necessary to check the correlation of price and efford.

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  11. I can’t thank you enough for the timeliness of this article. I always try to mature my pricing practices, and this is the best advice I’ve come across in a while. I will be pricing several projects today, and I’m looking forward to implementing the “three options” approach. Thanks again.

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  12. Some nice points about pricing strategy, but I’m not sure I completely follow your the idea of pricing by service rather than by the hour. I agree some services are valued higher than others and should therefore be priced higher, but internally we put time budgets on projects, as most agencies do, and time track so we can judge how effectively we’re working on a project (and whether it’s come in on budget).

    In financial terms the time budget loosely equates to an hourly rate, which may of course be different for different types of work to reflect skill, knowledge and risk around that service.

    Your idea of pricing up front seems to me (though I may be wrong) that you’d need to estimate time internally, and then charge what you think is reasonable to the client. It’s still time-based, just hidden.

    Some others have commented pricing by the hour allows some flexibility, ie. an agile approach. This is something that has worked well for us on some projects. Though we find the majority of web projects demand a “fixed quote”. So in practise we end up pricing stuff up front, though it is at its heart still based on hourly rates that may have been informed by an (ideally paid for) “discovery” phase.

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  13. Sorry, but I’m with the people who lean towards hourly rate. Personally I find value pricing to be distasteful, and borderline dishonest/exploitative. I understand the concept of value pricing (i.e. not leaving value on the table), but another way of explaining value pricing is that you’re required to think “how much is this company good for?”, or “how much can I get away with?”. I think some clients are wise to this, and are similarly put off by it.

    What’s wrong with a fair day’s work for a fair day’s pay?

    At my company we generally prefer a “time and materials” approach, which is consistent with hourly rates. We want to be paid our hourly rate for the work (and value) that we bring to a client - no more, no less. True, we’re not likely to get rich quick, but neither are we likely to go bust quickly either. Our ‘value’ is reflected in the rates we charge, i.e. is reflective of our levels of skills, experience, service, etc. Our rates are higher than some, and less than others.

    There’s a great article here with a highly relevant section called “The Curse of the Flat Bid” - well worth a read:

    I think hourly rate actually creates BETTER alignment between client and service provider. Not perfect - just better. If a client wishes to change course, add new features, etc. during a project, they’re most welcome to do so, and they know full well that this will cost extra. With value pricing the (cynical) incentive structure of the service provider is to perform as little work as possible to achieve the highest possible margin, and the incentive of the client is to squeeze every last drop of effort out of the service provider because the price is fixed.

    Hourly rate is also more consistent with the Agile Methodology (for software development) where the Agile Manifesto reads:

    “We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value:

    * Individuals and interactions over processes and tools
    * Working software over comprehensive documentation
    * Customer collaboration over contract negotiation
    * Responding to change over following a plan

    That is, while there is value in the items on the right, we value the items on the left more.”

    Much more honest and flexible than value pricing.

    p.s. We are a website design/development company first and foremost, and I concede that value pricing is, perhaps, more normal and acceptable in more subjective/creative/concept-driven industries such as branding, marketing, PR, etc.

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  14. Thanks for the thought-provoking article - in the most part I agree with you. Creative work is undervalued by the creators.

    When it comes to value-based pricing I have similar ethical concerns as itomic above (pricing based on how valuable the end thing is to your client).

    How valuable is a parachute to someone on a crashing plane? It’s worth exactly the same amount as a super expensive hi-tech magic teleportation machine to get him out of there: every last penny he has.

    If your client will make $1M/year from their new site that you designed and built in 200 hours, what makes you think you’re entitled to _any_ percentage of that?

    I find it interesting that value-based pricing seems to be readily accepted in the b2b world but is much riskier and sometimes totally abhorrent in a b2c context. There’s an interesting essay on value-based pricing as it relates to restaurants and their diners here: restauracion/Cap rest anexos/430502.pdf - The part on “Dual Entitlement” is particularly relevant - the customer expects the supplier to make a profit and they expect to gain something valuable in return.

    However (and correct me if I’m wrong) you’re suggesting pricing based on your overall service, which is slightly different, though still includes an aspect of perceived value.

    bq. a) When you charge by the hour, you and your client begin your relationship with diametrically opposed desires. You want to bill more hours, they want you to bill fewer hours. That is a sucky place to start a relationship.

    —I actually disagree with you here though; I see it very much in my interests to complete any hourly-billed tasks as quickly and efficiently as possible. The value you get from this is:

    * more time to spend on adding value to your business, marketing, networking, offshoring or developing passive-income streams or working on small fixed-cost projects (which are generally more profitable).
    * tasks completed under-budget = happier clients = higher perceived value = more referrals

    These benefits mostly outweigh any income from a few extra hours of working slowly. (And if it’s more than a few extra hours compared to your original estimate your client will likely never return).


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  15. These are really great points, thanks for sharing.  I am halfway through this process and feel affirmed now that I am heading in the right direction.

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  17. Great read - I’m a believer!

    In response, I went off on a bit of a tangent with this matter and wrote about the negative impact created by NOT shifting away from T&M work. I think we accelerate the decline in value of our service work when we bill by the hour.

    For those interested, you can read about it here:

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  18. Hi, fantastic discussion, something I am currently working on for our company is a better process and pricing model.

    My question however is how much time do you spend scoping the project and producing a proposal before the client even agrees to use your company and sign a contract?

    I have been reading Pro Web Project Management which is a great read. Within the book there is details of a thorough requirements document produced during the Discovery phase which I think is great as both parties know what is then within Scope. I am now wondering if this document should be produced before the client even agrees to a contract with you?

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  19. In the photography industry not billing by the hour can sometimes put you at a location much longer than you want to be.  We just have minimum time frames that we accept bookings for.

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  20. I like a lot of what Jason has to say. My only disagreement is his dogmatic anti by-the-hour stance. Clearly working by the hour is working for many people.

    I use both methods. For larger jobs I bid a set price, but for small updates my clients love that I have a 15 minute minimum charge. I make a fair amount of money on these small jobs (usually updates to sites) charging hourly (I’m a one-man show, freelancer). I can’t imagine bidding a job to update a few sentences or prices on a website. As stated by someone else here, my long term clients trust me.

    As in so many things there is no “perfect” and “only” way to do most anything. You have to find what works for you, what works for your clients and what you are comfortable with. Good discussion.

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  21. Thanks for a great post. It’s all the kind of stuff we’d love to be thinking about when discussing pricing, and I’ll be doing my best to inject a bit more strategic thinking in this area.

    However in the current climate the number one priority for us is to ensure we get the job, and most of our pricing logic goes out the window in favour of ‘what’s the lowest we can price this at to ensure we get the job and still make a profit’.

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  22. Thank you! Web design is a second career for me - I’m a recovering lawyer - and I’ve been telling myself that I can charge more because I understand the needs of the higher end professional market. It’s scary, but I think it’s working. Clients aren’t just paying for design and some html. They’re paying for judgement, for a work ethic, for pro-activity and reliability. I’d do the same hiring a designer. Thanks for encouraging us all to value what we do and charge accordingly.

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  23. I’m a little late to the party but I do see the advantages to switching to value pricing for creative work. As the author stated, charging hourly means you and your client inherently have different goals. Although as a company you want to advance a sterling reputation in customer service, with an hourly charge, you are still trying to bill as many hours as possible.

    This does not necessarily mean that you are trying to squeeze every client and purposefully delaying jobs, but maybe that you are simply trying to squeeze too many clients into your schedule.

    This is what the author means in value pricing. Pricing by the hour and not wanting to take advantage of the customer or avoiding the uncomfortable discussion on why it cost more than they assumed, may cause you to switch focus to new clients before your old ones are completely satisfied with the product and service rendered. Value pricing allows you to charge for this commitment. It puts a monetary value on the fact that you are willing to forgo new clients in order to service existing clients. Is it exploitative to charge this way? If you wanted to rent out a restaurant for a private event wouldn’t the restaurant want to be at least guaranteed what they would expect to make serving the general public?

    But there are more advantages than simply the relationships and expectations it builds with your customers. You as a business owner get to plan and forecast your earnings easier. You say many customers want changes and updates after sites have been created and this changes and updates are not design flaws but changes in trends or technology? Why not sell service contracts to the customers that think they may want these services? If you sell x amount of service contracts for x amount of dollars then you know exactly how much revenue you can expect to receive and just may be able to establish a steady revenue stream of satisfied customers. All without having to cram new clients into an already busy schedule…

    And as the author pointed out, do you really want to be continuously updating websites for negligible wages all the while your customers may be assuming you are nickle and diming them to death for a professional website that they may have expected to run smoothly for years to come?

    It is all about transparency. Explaining to clients upfront what it is you expect from them and what they can expect from you. Lay down the terms in an agreement and make it clear that if the terms need to be changed because the customers needs change, then the whole plan will have to be re-examined and priced accordingly. Manage expectations. By not getting the price out of the way first, you may inhibit your ability to provide your best possible work. If both creative and client are still focused on price, can they really be expected to have the interest of the project as their sole objective?

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  24. The man who mentored me many years ago taught me to say this to prospective clients. He did not allow discounting. And now, through the many years I have been in business, I can only conclude that my life has been much easier and more profitable because of my stubbornness to follow this simple adage when quoting prices to potential clients.

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  25. Thanks, I’ve recently been looking for information approximately this subject for ages and yours is the best I have came upon till now. However, what in regards to the conclusion? Are you certain about the source?

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  26. I always charging per project. It makes our customers more comfortable, because charging per hour “seems like” more expensive for them.

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  28. This is actually a great article. This article can really benefit new start-up entrepreneurs who are just entering into the business market.

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  29. Great article. Suggested solution works for waterfall type projects only. For agile type projects, suggested approach is catastrophic.

    Many customers aren’t able to think in abstract categories. First reasonable input comes when they actually see an outcome, which leads sometimes to redesign or huge amount of changes. Do not apply pricing suggested on this article for agile project type.

    Otherwise, for waterfall projects, go ahead.

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  30. The underlying problem with pricing hourly is that as time goes on and you become more efficient at your craft, you can accomplish something in less hours than say, someone with less experience. Does that mean you should make less money that someone with less experience? Of course not! This could be adjusted by charging more for your hourly rate, but what about when you are working with a group of people at varying degrees of experience? I worked at an agency for 5 years and I was the most experienced web designer there, and I could complete projects in half the time of the other people there. But if we based the proposal hours on my times, then if anyone else worked on the project then we made less money. I still price things based on my hourly rate when freelancing, but I’m considering a move to strategic pricing, especially considering that I’m working a full time job at the moment and only want to take on work in my free time that would be the most profitable and rewarding for me. Thanks for the article, it really made me think!

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  31. Great article. Charging for a design and development service is extremely difficult especially nowadays with lots of options available. I think the best way is offer additional value and exceptional service. That way you distinguish yourself and you will name a price, not compete because clients will be choosing you for value. Its more like the Apple model.

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  32. Sorry, commenting is closed on this article.