Breaking Down 5 Common Pricing Strategies
Over the years, we’ve helped hundreds of web professionals build amazing businesses by teaching them to focus on three key components: strategy, sales, and projects. This boils down to one simple concept: “High value work for high pay.”
And while these three components serve as the foundational elements of our program, the issue of pricing constantly comes up. People are unsure of which strategy will work best for them and their business. Alternately, many have a pricing strategy, but it isn’t working and they’re unsure of how to change it.
So we decided to ask a few web pros from our program one simple question about pricing: “What are the key factors in pricing your work?”
Here are the most common responses.
“I understand the value model and no longer present proposals/invoices with time on them, but time is where I start.”
Time was by far one of the most common responses we received. The problem with basing your work on time alone is two-fold:
- We are notoriously bad at estimating time. Trying to provide proposals based on your best guess is a recipe for a disaster. Think about how many times you think a small job will take an hour and you end up working on it all day. Or vice versa. How many times have you given yourself the day to complete a job and only need a few hours? Study after study shows how bad we are at this.
- Trading dollars for hours makes you a commodity. It strips the value and ROI out of any work you do, reducing you to the lowest common denominator: price. This puts you in a vulnerable situation where you can be nickel and dimed until you’re doing good work for way less than you should be making.
Market Value/ Demand
“Annual review of market averages for shops of similar size, doing similar work.”
It’s important to understand the market value of work in your area. Pricing in New York may differ slightly than pricing in Denver, but keep in mind that this shouldn’t dictate your pricing strategy.
You provide value by doing what only you can do.
When you start basing your work and your prices on what the people around you are doing, you’re engaging in a race to the bottom.
There are always going to be people doing cheaper work than you. That’s a good thing. They usually attract lower quality clients.
Knowing market rates is one thing. Letting them dictate value to you is something entirely different.
“Learning what the client’s requirements are and scoping out the work.”
Taking time to do proper discovery – sitting with a client and digging in with tough questions to truly understand their business – is one of the best ways to charge higher prices for high quality work.
When you understand the complexity of the job and the larger scope of what a client is looking for, you’ll be able to provide a more complete picture of what needs to happen to deliver great work.
This understanding also opens you up to identify and provide needs that will need continuous attention, allowing you to propose ongoing retainer work.
“I tend to lower my fees because I respect the relationship and the lifetime value of that customer.”
Probably one of the most important answers – relationships play a key role in most pricing strategies.
Taking a client through a thorough discovery process allows you to build trust and authority. Doing good work allows you to earn referrals and ongoing projects. Some even mentioned using their relationships as negotiation tactics by offering discounts to clients with whom they’ve developed strong bonds.
Whether you’re lowering costs for repeat customers or leveraging them for future work, building solid relationships should be a core component of everything you do.
Value & ROI
“My insights and creative thinking. I help them discover their brand…that has value.”
The second most popular answer to our question was by clearly defining the value a client is getting. The key to doing this is to understand a client’s goals, finding gaps and problems, and presenting solutions to those gaps and problems.
They don’t need a website. They need customers. Find ways to give them more and you’ll be a hero.
Value pricing is a cornerstone of what we teach in $10K Bootcamp. If you want to know more about how this strategy can transform your business and break the ups and downs of cash flow, we are now accepting applications to our winter program.