You might be great at what you design and even enjoy designing but when it comes to business then putting a price on t becomes a daunting task.
Price is not just a random number you put on the product or service. If you charge too high then you are at a risk of losing a potential client and if you are asking for too low then you are at the risk of dealing with a not-so-profitable business.
The prices also different in different situations and needs and hence the person dealing with it should at least make best efforts to gather information about the prices.
Know how your own cost work and then know techniques to gather how to price the product or service you deal with.
Know what your strengths are and then use them price the product in your favor. In doing so do not miss out on making it a fair deal for the customers as well.
It is not a simple method as stated and there are various different ways in which one can find out what price suits him the best.
Types of Pricing
There are different ways in which the factors are brought together to come to a number which will be the right price.
Each of these ways comes with their own set of negatives and positives and then it will be based on how one works in the business to pick the one best suited to them.
Pricing also shows what your delivery ways are and thus all factors no matter how small should all be considered while in the process.
Cost-Based Pricing
This is one of the simplest and most efficient ways of calculating a price for the design. It is done by calculating all the cost that is spent on getting the design project together which includes fixed cost, payments made, etc.
Along with adding a safe profit margin to this cost. Now the rest of the fixed cost is easy to add and assign to the project the major challenge in front of the designers and freelancers are that they have to calculate their hourly rate.
If you are working as a big agency which has a lot of designers and other employees working for you then you can just add up all their salaries and divide by the number of working hours to reach to this number.
For single freelancers, you will have to calculate the ‘opportunity cost’ which will the per hour cost of you working on the project.
This method is also appreciated by clients as there is a clear differentiation made on different cost elements.
This method has one flip side which is if you make a mistake in calculating cost even for a single project then the whole profitability can go down.
Hourly Rates
This one is similar to the cost based but instead of it, the project is divided into hours. The fixed cost of working for an hour is decided which is attached to the deliverables promised.
The hourly rates have all the fixed cost included in them so that these expenses do not get unnoticed. It is a common and accepted methodology of pricing projects.
This works well as the cost of the project can be compared to the completion goals to check whether progress is made at the right place.
The one downside which is often mentioned regarding hourly pricing is that it is not a fair comparison between two potential developers or service as other aspects of their work are hidden.
It also adds to the workload as the hourly progress needs to be meticulously tracked which will be demanded by the clients.
This also becomes a time-consuming process as a creation of separate time sheets and then sometimes explaining to the clients.
Packages and Product Pricing
This form of pricing works great as the complimentary items when clubbed together forms an intrinsic value. For example, you can add a logo design, a website design, and card which when add up will give a price of 3100 but which can be offered at a low rate of 2800.
The final price in such cases is lower than the actual cost which helps the client opt for a package deal.
The service when clubbed together reduces the client’s efforts and ensures a continuity of business which is something they are also looking for.
This also provides a competitive edge to the designers as they can deal with the competition who offers the lower price for a single service by offering the same service in the package deal which the client would prefer to use.
The downside is that some clients might not require some of the series and will ask for the removal of such service which is not easy.
The re-costing takes time and efforts and sometimes not profitable. It also leads to the clients getting disinterested in the service just because there are unwanted additional services they are asked to pay.
The packaging thus should be created after service is strategically and carefully clubbed together. The best situation is when the clients are happy with the services in the package and price they are offered at.
Business can try and create flexible plans for that services at the desired cost can be added to the package but this is not possible for small business owners.
Value-Based Pricing
This one is a hard way of pricing the product but when implemented is one of the best and strongest way. This one works by calculating the value of the work one does for the clients.
This is when the profit or the revenue of the client is increased because of your service then that is the additional amount you have created for them which should be the base of your price charged for the product or service.
You can pick any one of the following methods by just analyzing their value addition to the business style. Evaluate their pros and cons and then finalize the pricing method you would want to follow.
Sonal S Sinha is managing director of Shri Krishna Technologies. He has been writing about website designing, digital marketing and WordPress ecosystem for the past 15+ years. He handles the overall operations and in his free time writes suitable blog posts which are knowledgeable and informative.
