: How to use value-based pricing for design projects? tl;dr What is the best way to use value-based fees for design projects? What would the "value" be? I see that a lot of designers use time-based

@Phylliss782

In my experience I can say that all above options are good if you can mix them.
The time-based pricing is adequate to the low budget tasks. Value-based pricing is better for bigger and more complex projects. For example if you create a business card calculate your time. If you create whole identification, count the price using value method.

To avoid unwanted conflicts with your client, prepare very detailed agreement. Show and calculate all elements which you will have to prepare. In case of complex project, split your work into a smaller parts and calculate their price. And the very important thing, the penalties. Your client should know in what time they are obligated to give you any feedback or acceptance. How much time they've got to give you all necessary materials and what will happen if they fail. All these things have a very big impact for the final price of your project.

Vote Up Vote Down

@Lengel450

Free-market theory defines the value of a product or service as the amount of money someone else is willing to pay for it. In other words, the value of your service is how much a client is willing to pay for it, and your ability to justify your fee is itself a determination of your value.

I understand your definition, that the value of your service should be based on the expected revenue increase it would generate for the client. However, the amount of research you would have to do in order to make such a quote would usually outweigh the project itself.

Instead, if you're uncomfortable with a per-hour rate, use a fee-per-service rate but offer multiple options presented in terms of their value to the client.

In other words, you'd offer a basic quote for a simple logo design, and then progressively higher quotes for extra research (an assessment of the competition's branding strategy to ensure the logo is unique, or user testing ) or extra design (multiple logo options, multiple sizes/styles e.g monochrome or simplified versions).

You then present the client with a "menu" of options, and let them decide whether they want to pay for the higher-value work. Make it clear what each option entails -- i.e., if they only pay for a basic logo design, and then don't like it, there will be fees for a re-design.

The quotes for each value level would be based on your expectation of how much time it should take, but can also be adjusted if you think you can offer a service your competition can't, regardless of whether it is time-consuming or not.

Vote Up Vote Down

@Turnbaugh909

The only justification I ever use is my experience in the field, my portfolio, and occasionally (actually rarely) past results for previous clients.

If I charge 0,000 for a project, that's my price. If the client doesn't wish to pay my price, they are free to seek other avenues.

One thing to realize, for almost everything, is that after overhead is calculated, any price point is purely subjective. Who decided that a mechanic charges /hr for labor? or that a landscaping company charges /hr for labor? The companies simply looked at market trends for similar services, their own overhead, experience, and capabilities, played with pricing a little, and then determined the price which positioned their services where they wanted to be in the market.

The same holds true for design services. If you look around and everyone is designing tri-fold brochures for 0-00 it's purely your choice where you want to position yourself in that market. You could complete work for 0, 0, 0 or 00 - the only difference is the return on your efforts and the amount of clients you may acquire. At the higher rates you need less clients to get the same return, obviously. If you know that every tri-fold brochure takes you approximately 10 hours to complete and your base hourly rate is /hr, then you know that 00 for a brochure is the minimum you can charge. But if you have 10 years experience as well, you should be pricing higher in the market than the minimum because there is value in your experience.

I use value-based pricing almost exclusively. I know what my minimum hourly rate is and it is used to get ballpark low-end estimates. Beyond that, my experience and proven track record can't be quantified in direct hard terms other than the success past clients have had after using my services. I know what the market will bear in terms of pricing for general services. I price where I get enough clients to keep me working but not so low I have too many clients.

With value-based pricing there is no "hard" model to follow. You simply need to know your minimum rates so you never drop below them, after that you're free to price above the minimum anywhere you feel serves you best. If any justification is needed, it's merely a track record of experience and proven abilities to handle the projects on hand in an effort to show competency at your price point.

I believe, value-based pricing is really only a workable model after you've had some time in the field and have proven yourself as competent. Someone fresh out of school or just starting out may have a more difficult time acquiring clients unless they can specifically reassure the client that the work can be completed well and on time.

The primarily difference in pricing models is the scope of reflection. With hourly-based or time-based pricing you are looking at what you, yourself, or your business. What you can do. What you want to earn. What you feels you are worth. The entire reflection is inward. With value based pricing you have to broaden the reflection to look at the field in its entirety. You need to be aware of what others in the industry are charging for similar, greater, and smaller services. You need to know what the other designers in your general market would expect to be paid for a project similar to the ones you receive. So the reflection is based upon the industry as well as upon yourself. If you value price yourself above everyone else, you may price yourself out of the market. If you go too low you may actually not get any work due a perceived "bargain basement" value. You simply can't use value-based pricing unless you aware of the current market values.

Being creative in nature, there are many in the design industry with some big insecurities regarding pricing. After all, it can be difficult to put a price on yourself and expect others to agree to it. You are asking strangers to put direct value on you and rejection can be taken personally by some. But if you get past the emotional stuff and look at the business as a business by honestly valuing your services and capabilities and honestly compare those to what others in the industry are doing it shouldn't be too difficult to position yourself via pricing.

Related questions:


What should I do if a potential client claims my pricing is too high?
Which is a better design pricing model?

Vote Up Vote Down