Strategic pricing helps your brand and helps you to make more money. Issuing a price is like handing out a business card—it’s a great branding tool, but be careful about what it says to your market. Beginning relationships with customers at a high price makes the statement: “we’re good at what we do and we know it.” Fighting with a competitor over a low price says “I’m uncertain about my abilities, so I’ll take what I can get.” Failing to use a considered pricing policy will leave you treading water in a sea of design mediocrity, allowing you to just stay afloat while you sell commodities. Blah.
Here’s how to become strategic about your pricing:
1. Price by the service, not by the hour. Though very normal for the creative professions, one of the most non-strategic things you can do is to charge by the hour. Why do you charge by the hour? You may have read about charging by the hour in a book, seen your previous firm do it, or heard a friend say that’s how you were supposed to do it. Charging by the hour is non-strategic on many levels:
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.
b) Billing by the hour does not consider outcomes for the client. When clients come to you, they want some kind of result from your work. They want to invest in your abilities to bring clarity to chaos and deliver effective messages. When you deliver a bill based upon your arbitrary internal costs, it may not translate into specific desired outcomes for the client. Always consider the value of the outcome to your client when you set pricing.
c) Billing by the hour does not allow you any creativity in billing. Always try to tie your up-front fee to what the client values. And when you discover their value triggers, then you can get creative to make more money. For example, you can ask a client “what is the greatest outcome you can imagine from my work with your company?” Maybe they’ll say “I want your work to be so effective that we sell 15 to 20 percent more products compared to this same time last year.” Now you can attach your price to their outcomes. So you might say, “My base price is $50,000, but if you sell between 15 and 20 percent more products than this time last year, then I will receive a bonus payment of 5 percent on your additional sales.” This links what you get paid directly to outcomes. And the clients won’t mind paying if you helped them sell more stuff. Everybody’s happy!
2. Slow down your sales process. Slow down how, when, and who you take on as clients. You need time to determine a client’s needs before you price their projects. You must know what outcomes they desire. Diving into a project with a minimalist contract that speaks to your hourly rate will not let you know when your client is truly ecstatic about your work. And the only reason to serve clients is to bring great value to them and make them extremely happy!
Clients often self-diagnose their problems. But they can be wrong. You are the expert. That’s why they’re hiring you. Slow down your process and warn potential clients that you are not the “emergency” designer. Clients that are in a hurry are problem clients. Slowing down allows you to not only be creative in pricing, but also allows you the time to determine what the client really needs. Slowing down helps the client to get their needs met, while you get paid what you’re worth.
3. Inject value into your client’s experience with your service. You simply have to charge more. That is a totally strategic move, and one you can’t do unless you have the guts to do it. But you can’t charge more for crap. It’s a little known secret that you can charge not only for your creative work, but for the client experience around the work you deliver. In essence, you can price things that have nothing to do with design, but have everything to do with the experience your client encountered throughout the process of engaging with you on their project.
Clients will pay more for your work when you deliver the end result with some well-designed client experiences wrapped around the whole process. This injects value, and when you inject value, you can price your services higher. Strategy in pricing means creating something creatively that you can charge more for.
Establish a client intake process
For example, imagine your client intake process is a four-step process. First, determine the purpose behind your client’s needs. Ask them questions about their purpose for wanting your services. Ask them how the purpose could change. Second, investigate the expected result. How will you know when you’re done? Investigate your client’s ability to bring this project to an end. Is this the type of client that will never be satisfied? After applying this process for some time, you’ll be able to tell if a client is not tracking with you. Scope discussions could be added to this phase of your new client intake process. Third, conduct value discussions. Value discussions should be about identifying what the client truly values and how you will price the things the client values. In this part of your new client intake process, you can address how you want the client to interact with you and find out how the client wants you to interact with them. Do they like to meet face-to-face or is a digital relationship okay? These value discussions will directly influence your price. Finally, create engagement. This is where you determine your price, and offer three price options for the client to choose from, based on scope. I typically offer three options. I will typically include things in my top package that the client didn’t ask for because they didn’t know they could ask for it. The engagement process is also where you request an agreement to be signed and get your first down payment on the work.
Change your thinking, charge what you’re worth
These processes are easier for the more experienced creative professional. But how do you implement pricing strategy when you are a fairly new creative? I see the answer as part retraining your brain and part raw guts. When I coach creatives, I walk them through specific ways to simply step up their price with each new engagement that they get. Creatives must not be afraid to charge what they think they’re worth. At its core, this technique takes guts. But the more we work through these exercises, the more comfortable the creative is at going higher and higher with their price until they are comfortable where they are supposed to be.
The more heady answer to implementing strategy for an inexperienced creative is to retrain your thinking. Explore your beliefs about creative services, where you developed your beliefs, what you think the world thinks of creative professionals, what true value you bring to your client, etc. This applies not only to creative professionals, but to most kinds of professional. When pressed, my clients will often come to the conclusion, “but I don’t think I have that much to offer my clients.” This thinking needs to stop. Your services are valuable; and your pricing should reflect that.
Strategic pricing is hard and good work to undertake in your profession. The sooner you get started, the quicker you will learn what it means to be strategic not only in pricing but in so many other important tasks your clients hire you to do.
Here are three things you can do now to get started on your journey toward strategic pricing:
- Develop your new client intake process, similar to the example above. Add the various steps that you feel are valuable and walk your clients through it BEFORE you begin your work.
- Begin offering three options to all of your work. And always include things in your options the client did NOT ask for. When you start selling things your client didn’t ask for, you will be surprised at how many clients choose the higher options. You will make more money and the client will get more of what they want.
- Test your pricing, but don’t benchmark! To know what your market will bear, begin pricing higher than you have been in the past just to test your market. And avoid benchmarking—which is the process of looking at what your market or direct competitors price their services at. Remember, your competition may be pricing non-strategically as well. Don’t follow the blind. Strategic pricers don’t follow, they lead!
In summary, we should strategically charge clients for what we do by pricing our services (not our hours). Take new clients slowly, show them your intent to take care of them and give them a wonderful experience. Deeply consider where you have developed your thinking on the creative profession and its worth, and then step out with some guts to charge your clients for your true value. Strategic pricing comes with practice, and your skill will grow over time. Pricing is a learned discipline that anyone can learn. Start practicing! Do your clients a favor, charge them what you’re worth. You will both be happy as a result.