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Apr
15

Pricing

Last night I spoke at a Women in Business meet-up on the topic of blogging, twitter and facebook for small business. The event was a lot of fun, and I met a lot of wonderful women. At the end of the event, I had a few of the people ask me what I charge for my services and I couldn’t give them a straight answer. I know that this was frustrating for some of the women, but it was an honest answer. I explained that my prices vary based on the level of services needed, the size of the commitment, and the technical involvement. This, of course, was no more helpful as it still didn’t define my prices, but again, it was an honest answer. Finally, after realizing that this was not an answer they were happy with, I gave them price ranges, and explained that to give a truly valid price quote that I needed a lot more information from them. I could tell this still wasn’t exactly what they wanted, but it would have to do.

When I got home, I started thinking about my answers, and the way that products and services are priced. In most cases, you can look at a product and the prices are plainly printed on the tag (unless you’re in a city that likes the whole “let’s negotiate” system), so you don’t have any questions about the cost. Unfortunately, when it comes to most services, there is no easy answer to “what do you charge”. An automotive technician can give you an idea of the initial cost before looking at your car based on what you tell them, but until they look under the hood or inside the dash, there is no way to give a concrete answer. It is the same thing in my business – as much as I would love to say a web design costs x amount and blog management costs y, that is neither fair nor realistic. The benefit to the way that services are priced is that there’s no one-size fits all pricing, which means that a client will never pay more than they have to for exactly what they need. The downside is that the client is really at the mercy of the service provider, since there are no published prices to determine if they are getting the same price as another person.

I believe in the system that I use – pricing a project only after I have thoroughly understood what is needed. But, there are many people I know in my industry who have flat rate pricing because it is “easier”. I have heard the positive and negatives on both sides, and have my own thoughts, but want to hear yours:

What do you think about the pricing on services?

Do you struggle with pricing your services?

**Unsure why the title only has one word? Read my stand against blog titles.**

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Category: Blog Management, Business & Marketing Strategy, Graphic & Website Design
Topics: , ,
  • jimwalery

    Kirsten,

    Funny, I was asked the same question last night at the OC Product Manager meeting and I had the same difficulty. You are right. It totally depends on the project and the client. 1st discussion with client is do they want an hourly price or have it project priced. I tell people that if project based one of us will be unhappy in the end. For project estimates, me as the consultant, estimates the number of hours the project will take in the worst case possible. I imagine every problem that might occur for that project. Of course the worst case is not always going to happen so the client is going to pay more than if they had paid on an hourly basis. But they are one that wanted the fixed price. For services that are paid on an hourly basis there needs to be trust between client and consultant. When the consultant submits an invoice to the client with a number of hours on it, the client needs be confident that this number is accurate. To calculate my hourly rate as a consultant I took my previous hourly rate as an employee and added 20% to pay for additional items such as insurance and business expenses. But it is difficult giving pricing without really knowing the client and the project. And that can't be done in one meeting. Flat pricing might be able to be done only if you have done hundreds of projects and you can historically look at what price should have been used. Thanks for the post on an interesting topic. Great job.

    Jim

    • kirstenwright

      Jim,

      I absolutely agree with you about the positives and negatives of flat rate vs hourly. Thanks for sharing how you calculated your fees, I appreciate it :)

  • http://wwwjackbenimble.blogspot.com/ The JackB

    Sometimes it is impossible to give a specific answer because there are so many variables. I have been in that position many times. Prospective clients are generally receptive to that provided you can demonstrate the value of your service and why it is important not to provide a routine answer. You'll lose some business by not having a flat rate, but the customers that stick around will last.

    They'll last because they'll see that you care and that you are not providing turnkey, cookie cutter operations that anyone can do. There is value in customization.

    • kirstenwright

      Jack, I think that you are definitely right…if the client doesn't understand the value of custom pricing, then they probably wouldn't be a good client anyway.

  • alanbaumbach

    Kirsten—I have always had this problem and I have never gotten a conclusive answer that works in all situations.

    What I have used sometimes is a range saying that I have had engagements ranging from XXXX to YYYYY. Is that range meet your expectations? Do you think you are closer to the XXXX or YYYYY? Why? OK—sounds like we should talk further. Can we meet next Tuesday at 10am at your offices to discuss this furhter?

    • kirstenwright

      Alan – I definitely think you are going the right way about it. It makes the most sense and makes it reasonable for the potential client

      • alanbaumbach

        Kirsten—I have also used the price for an oil change versus the price for a transmission rebuild. Both ar services for your car but the total price and per hour price for each are substantially different because of the skills and time involved.

  • alanbaumbach

    Kirsten—I have been very impressed by the approach of one custom software consultant. After a one hour consultation with the client, he provided three quote numbers, an optimistic, a pessimistic and a target cost. This demanded the client and the consultant be sure of the actual deliverables and to have the necessary 'heart to heart' conversation with the client. Oftentimes this included items the client could provide to reduce the cost.

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