Entrepreneur Advice

What is Value Based Pricing

A lot of designers these days are saying goodbye to hourly based pricing in favor for something called value based pricing.

What is Value Based Pricing

Value based pricing is when a service provider price based on the value they will be giving their customer and not just the time spent doing the projects.

Imagine scoring a huge company as a client where the work you’ll be doing for them will give them thousands and more in profits. But you decided to charge based on hours. You make a sale of a couple hundreds while your client uses your work and make thousands and thousands in profit. That doesn’t sound too fair am I right?

Well with value based pricing you put in the work initially to learn about your client and find out what their expectations of the project are. (You also find out how you can truly help them achieve their goals, leading to better client satisfaction.)

From there you can then determine how much value you’re actually providing. You get an idea of how big their project actually is and you can sort of determine their budget.

Now that you know all this info you can make an educated estimate of the cost of the project and present accordingly. This leaves both you and your client happy. You get a more worth while and fair sale and they get great quality content.

This is essentially the heart of what Value based pricing is. It’s not a scheme or a tactic it’s just a better way of getting what your work is worth. Ever wondered how the big names of design make big money? Well most of them use this pricing model.

Disclaimer

Know your target market

This does not mean that you over charge your potential clients. If your target market are local start ups then you know you can’t charge the same as if you were to charge a big tech company. This is why it’s important to research your clients before you talk about money.

Read my article How To Price Your Design Clients to get more info on applying this method to your business.