Pricing Strategy for My Creative Business
Types of pricing strategies
There are a number of pricing strategies that you can adapt for your creative business, these can either pay you for the hours that you work for your customer or the value of the work that you do for them.
What we mean by value is what the design is worth for your customer. If it is a design for a new logo that will be the cornerstone for their new business identity, it will be worth more to them than the design to be used in their day to day business.
Pricing your work purely by the number of hours you spend doing it seems to devalue the work that you do as a creative agency. It does not put a value on the inspiration and creative value that you add to your client. It is purely a transactional value that is put on your work.
Pricing your work by what it is worth to the client, means that you charge for the skills and expertise that you have. It means that the value that both you and the customer put on the work is the same. You price the work and they are happy with the price that you charge because they see what it is worth to their business.
Psychology behind pricing for your creative business
There is obviously a psychology behind how you choose to price your work. You do not want to be seen to be the most expensive, unless you are sure that you can add that value to your customer. But also being the cheapest would also mean that you are not going to be able to deliver the quality of service that your client demands from you.
You need to look at your pricing strategy that you are going to adapt for your creative agency and have a pricing system in place to make sure that you can price your work consistently for all your customers. Pricing effectively in a way to attract customers, keep your existing customers whilst at the same time maximising your revenue.
You want to charge them the most for that individual customer. You might give them a price that is more than anything else you have quoted before, but if they were willing to pay more for your work you have still left money on the table. Each customer will have a price that is the most that they will pay for their work, the skill is trying to find that price for each client.
Pricing per hour
Pricing per hour is well established, it is easy to do, you keep a timesheet for the work that you do for each client and you charge them based on the amount of time you spend doing their work.
It is very easy to understand and your customer can see how many hours you have put into your work. But is that really suitable for creative freelancers and creative agencies that are giving such value to a business?
It might be expected that when you take your car to the garage that they would charge you per hour for any work that they do on your car. But for work as a creative that may not be related to the amount of work that you do, but is based on inspiration and your skill as a creative to deliver for your client.
To design a logo might take you weeks to do, but the end result might look simple, but that does not account for all the work that has gone on to get to that point of a logo design for your customer. That is the thought and the process you have gone through to design a logo that is simple and elegant. .
Fixed pricing
Another pricing strategy is to charge a fixed price. What this means is that you agree on a price for the work with the client before it takes place. This gives the customer the assurance that they know what they will be paying for your work and that you know what you will be paid and can agree on budgets for your work.
I can certainly see the benefits in doing this type of pricing. It is easier to attract customers when the price is agreed from the outset and there are no surprises when they get their invoice.
But it does lead you to situations where you are working to a very strict budget, customers will always want to negotiate the price down as much as they can which will squeeze the profits that you make.
The issue with this is at some point you will be doing the calculation as you see with the hourly pricing, how long will it take to do this work? So it is not really a fixed price but you are setting the maximum number of hours that you will spend on your customers work.
This may result in the pricing not being a fixed price but a price based on the number of hours you are going to spend doing the work.
Value Pricing
Value based pricing would mean that you charge your client what the work is worth. If this is a logo for their new website and will form a large proportion of their new marketing strategy it is obviously going to be worth more than any regular design work that you do.
Value pricing means that you charge the work what you are worth. It values the work you do as a professional creative business. It doesn’t just charge your time out as a creative agency, it values the skills and expertise that you can add to your client and how you can improve their company.
This system of pricing also means that the customer sees the value in the work that you do, when they see this value they are less likely to complain or object to the price that you charge.
If for instance you are designing a logo for your customer. They are more likely to see the value in the price that you charge if it is part of a rebrand that they are doing or if it will be part of a new marketing strategy for the company.
This method of pricing would seem to be intrinsically what a creative agency is about, showing the customer the value that you are adding to their business and also charging for your work in a way that values the skills and expertise rather than just reducing it to a mere transactional price.
Subscription Pricing
Subscription pricing is a strategy that prices your services based on you giving a package of services to your customer. It may be that you offer a price model to your customer that covers all of the creative work for a month at a price point that you both agree on.
This normally is for a higher price than they would normally consider but it includes all the work that you will do for them in a month, it may be unrestricted or it may have a restriction on the amount of work that is done. You have to decide on the scope of the work that you do for your customer and anything out of scope may need to be invoiced separately.
The main advantage of this model is that it builds relationships between you and your client. It means that whatever they want they will come to you first and it aims to keep you as their main creative agency that they use.
Conclusion
There are many different approaches to pricing that your agency can take, the one thing that you need to do is to get a pricing system in place that is consistent and that anyone if your company can use, not just you as the business owner your staff need to be able to do this as well.
If you are going to implement a change in pricing strategy this needs to be communicated to your customer base well in advance if it is going to lead to a price increase.
Next Steps
If you need help in looking at the way you price your customers for your work we offer a variety of business advisory services. We can help you look at your pricing model and help you get a consistent and systemised way to price your customers that all your staff can use.
Please arrange a call to see how we can help you price more consistently and have a better pricing strategy in place for your creative agency.
