Pricing on Value
It’s been a while since I discussed pricing. It was all the way back in post #7 when I wrote about how to find your price. It’s long overdue to write about one of the most practical topics I have to discuss, the topic of money and pricing your services.
In the original post I discussed how to find your hourly rate, but with value based pricing, you need to consider the value of a piece of work you provide to your client. I am no longer talking about trading time for money, with taking the next step in your professional career, you need to price your products / services based on its value to the client.
Pricing on value is the next step to growing your business, freelancing, and professionalism. No longer are you only covering your bills and expenses based on an hourly rate, or your ‘baseline’. Your baseline price covers your cost of expenses, the cost of running your business. Web hosting, email newsletter service, internet provider, various accounting / invoicing / digital storage, your rent / mortgage, household bills, electricity, gas, waste, water etc. and general unforeseen expenses. These are the typical costs that must be taken into account for anyone living in the 21st century. When you begin freelancing, discover your baseline price by taking into account all of the above expenses by charging based on an hourly rate.
When you’re doing a project, you’re not doing another. Take this into account when you’re finding your ‘baseline’ price. With practice and after experience with clients and producing products, you can start to charge a higher rate, based on the value you’re providing to your client or customers.
This is where value based pricing applies. The value comes from the client. You need to identify the value to the client by forecasting what kind of monetary return they will see from your product / service.
In order to start charging your work based on value, you need to position the conversation around solving the problem, providing value and developing a relationship with the client. It’s pivotal that the client doesn’t see you as an expense. How do you do this? Ask questions.
Don’t be afraid to ask questions, talk about how much they expect in returns from this project. Talking about money when you first begin freelancing and taking on clients is uncomfortable and seems intrusive. But these are just figures, it’s business, businesses live and die on how much money they make. It’s not intrusive, it’s your responsibility to ask the right questions to the client, instead of running into a problem halfway through that could have been solved had you asked it at the beginning.
When you start freelancing with real clients and the subject of how much you charge comes up, your first thought is to protect the client. You don’t want them to get “deer in the headlights” syndrome. Meaning, you’re afraid to tell the client your rates out of fear that they will freeze up and become hesitant in proceeding with the project, scaring them away. So you consciously lower your rate out of fear of this. Lower than what they should be.
This is wrong. If the client doesn’t want to work with you because your rates are ‘too high’, then that’s their problem. You have your rate for a reason, you’re good at what you do. Be confident in what you charge, and be comfortable talking about it. This is your area of expertise, you’re a professional in this field, this is your livelihood. When you find the right client for you, through your questionnaire, one that is willing to come under your process and recognises your professionalism. You have no idea how much a client is willing to pay for your service.
What you thought was high, could be a fraction of what they were willing to pay. Don’t be afraid to charge more for your service.
Ask the client questions;
- What kind of returns are you expecting to see from this project / campaign?
- What can I create that solves a problem for you?
- Why did you consider me? What value do you think I can offer to you?
You need to be good at what you do in order to price your products or services based on value. You need to hold yourself in a professional manner, know your field of expertise in order to set goals and execute them for them client. Convey the unique value you have to offer to the client. Why would a client hire you? Would you hire yourself?
Position yourself as an investment. Not as a commodity. Don’t be afraid to charge more.
People will always undercut you and charge less. This doesn’t matter, because a client that doesn’t want to work with you in favour of someone who charges less is not the type of client you want to work with. Changes, unhappy with the design or direction, subjective views and judgements, general hassle, telling you what to do and treating you like a technician. These are the calling card of a bad client, but only bad designers take them on.
Be confident and competent about your work and when your proposing your rate to the client. If you tip-toe and stutter around the price of your service, it will lower its perceived value because it seems like you are not confident in your ability.
Clients come to you as a professional. They want someone who knows what they are doing. A client knows their business, and you know yours. Don’t be afraid to show them that. When you’re talking to clients and establishing the relationship, they already know you’re a professional through your proven track record, ie. your case studies and your writing. They will know you have unique value to offer them through your work and with the problems you solve. Professionals don’t have to be managed.
Who goes to a professional and has to manage them? Checking in to see how they are doing, if they are doing it right. You visit a doctor or a mechanic because you have a problem that needs to be solved. When do you tell them what to do?
Low-ballers who undercut your rate and charge little to nothing are saturating the creative industry. Providing entry-level solutions where they take on clients from hell that tell them what to do from start to finish. These people aren’t professionals. They are only interested in money.
Do you really want to be considered on the same level as this? Think of the artists you follow on Instagram and Twitter, do you think they charge as low as them? You follow those people for a reason. They are good at what they do, and they charge for the value that they provide.
If you charge more, it increases the perceived value of the work and your services. If a client contracts multiple designers for a project and receives a logo worth €500 and one worth €3,000, which one do you think they are going to use? Of course the more expensive one, because it possesses a greater perceived value through the eyes of the client in the sense that “we paid more money for this, so it must be better”, which is not necessarily true.
This is why you shouldn’t be afraid to increase your rates and charge the client based on the value they will see from it.
Double your rates. Charge for your knowledge and expertise, not per the hour.