Value Based Pricing – How To Charge For Design
I stumbled upon an interesting seminar by Chris Do from The Futur Youtube Channel on ‘How To Charge For Design – Value-Based Pricing. The seminar opened up my understanding of pricing based on value rather than an hourly rate. Often clients will focus on how long a certain piece of work will take and do not value how much the product will be worth to their business in the end. The seminar shows how you should ask questions about the problem that the client is having. Based on the problems they wished to be solved, you can offer a price that is fair to you and your client.
Amateurs vs Professionals
When a client approaches you for work, you start to open a dialogue with them. Chris Do defines the difference between an amateur and a professional designer approaching the conversation. Amateurs will often jump straight to the pitching, advising the client, timeline, and pricing. Sometimes the services they require may not fix their problem. Professionals on the other hand will ask questions to discover their problems and what metrics they are hoping to improve within the business. Sometimes the service they were looking for was not the right one for them and their business.
Context of Value
When giving a price for services it's best to have the conversation of the context of value that your services will give to the client and business. The context will help shape the price and value that the services will have on their business. It will also give a better perspective of investment and return. Often clients would like to invest as little as possible into service and expect huge returns for their business. Chris Do goes through a flow that is best to determine the price.
Desired Future State – Find out the problem and the desired result the client wishes to achieve.
Success Metric – Determine the success metric that the client wishes to achieve in the end.
Valuable – Using the success metric to determine how much value you can offer to the client and business.
Price – Using the price that the client was thinking of investing into the problem and how much value that investment is worth compared to the expected return.
Summary
The seminar by Chris Do does open my mind on value vs time. By giving the context of value to the client will help them understand the value of the service to their business based on the return. By asking the client about the problem, you can gain a better understanding of the service that is best for them and will enable you to serve their needs rather than your own which is acquiring business. Gaining a better understanding will also help you explain the context of your value to their company. You would not expect someone at your car garage to recommend certain services without knowing what your problem is. Next time a client comes to you for your services, remember to start serving rather than start selling.