Monday, June 21, 2010

The Secret to Our Pricing

I feel bad for companies trying to price out web sites and print promotions these days. The pricing they are getting is all over the map. So many companies come to us after trying one or two of these cheap methods to get their work done, and after seeing the result, they ask us to do it right. Unfortunately at that point, they are way over budget. Ironically, had they gone with us in the first place and done it right the first time, they would have saved time, money, headaches and – best of all – gotten better results.

Many companies have relative pricing models which differ for each client. They price based on "what will they pay",  "what's in their budget" or "I'll price them low, but get them on the monthly costs". Sometimes I'm baffled by the range of prices for the same project.

What is our secret to pricing? Our method is simple: We charge for the time it takes to do it right. I have a spreadsheet with all the tasks for the project and we mark the time it takes to do each one. I have two rates: an "A" rate for high level creative and a "B" rate for production work. So, I multiply the time by the rate, and that's it. I like this model because it's honest, clear and transparent. You can trust that you are truly getting what you paid for.

There are many companies that charge much more than us and other companies that charge much less then we do. They have the same business costs as we do, and they must be making money or else they wouldn't be doing it. If they are losing money, they may not be in business long, making them unreliable for future work. So, how and why are they charging less or more than we do? Here are some things to consider. 

Why are they low?
  1. The quality of work is most likely poor. They aren't going through the steps and time to execute quality design. Even if you don't care or can't tell, your potential clients can and will.

  2. They may be off-shoring their work and just collecting a big commission on the project. Working with a local company helps to insure you are correctly represented to your local market and are speaking directly to your target audience. Off-shoring may be cost effective in the short term, but will have dramatic long term economy effects.

  3. They may be moonlighting as a freelancer, but appearing like a company. These types of freelancers won't be as reliable, as available or have as close an eye on details as a full company.

  4. There is a good chance they are using a template design and not creating an original look for your company. In a world where competition is so fierce and there is so much noise from competitors, you need a unique and solid look to gain eyes and customers.

  5. They may be charging low fees for design, because they are up-charging you on your hosting, printing and many other services. They may be including fees for services you don't need. When you need to move to a new design company, they may hold your design files 'hostage' until you pay to have them released to you.

  6. They may be desperate for the work. Desperation does not make for a good working relationship. Who knows if the company will be around a year from now to help you with your next urgent project.

  7. They may be outsourcing all the work to low end freelancer.

  8. They may not have a project management process in place to ensure a smooth project. A successful project is sometimes 75% planning. We have a client area for files and schedules (schedules we stick to) as well as personal support for our clients when issues arise.

  9. They may just be Yes men.  A quality design company will take an objective look at your company and provide a look that is both appropriate and eye catching.

  10. Did they include changes in the project? Or will they hit you with big charges as soon as you need to adjust something. 

When seeing a low price for design, ask yourself this: Will they devote the time to do the project right? Will they management process successfully? Will that offshore design company understand your specific industry and target audience? Will that template make you stand out or be part of the crowd? Do you really want a yes man or a company who will provide you with what you really need? Is a low price more important than a creating a piece that represents your company correctly and gets results?

Why are they high?
  1. They may have very high overhead costs. Many large agencies have a bloated staff. How many people will you get billed for that touch the job and don't need to? You should not be paying for the fact they are over staffed. Also, are they located in big fancy office in a big expensive city?

  2. They create spec work in hopes of landing big clients. Are you paying for all the times they create a design on spec and don't land the job.  This is why we don't do spec work and think other companies shouldn't either. 

  3. They could be using out dated and unnecessary steps in their process of working and project management, creating a lot more time spent on the same job.

  4. Meetings, meetings, meetings! They sometimes have meetings about having too many meetings. All those employees and all that time costs money.

  5. They may be including strange fees for services you don't want or need.

  6. They may make false promises of an SEO utopia. Search Engine Optimization is important and there are things you can do to get listed high, but there is a reality to how well it works. Don't be suckered in with this new snake oil.

  7. They may make false promises of results.  Many companies will exaggerate the success of their projects in an effort to make a sale. Most projects have less than a 1% success rate. With the right piece, targeted to a specific audience, at the right time your project can be much more successful. However, with so many factors going into the project, be cautious of anyone promising results. 

  8. Their sales staff may be better than their designers. In addition, they'll need to work in that sales commission into the price. 

  9. They may have inflated their price to create an illusion of quality. Some companies will charge 2 or 3 times the price just to appear to be the best.

Your company and services are perceived at the same quality and consistency as your web site and promotions. Your logo, web site, business card, brochure, etc. is sometimes the most important or only visual representation of your company. Can you risk your company with a low end company or pay inflated costs for a large agency? Can you afford to hire a company to do work and not feel confident about using those promotions or site to get you new business? Represent your company correctly and confidently with promotions that surpass your competitors. Here is an older post I wrote about the need for quality design.

Do it right the first time. Save time, money, headaches and best of all, get better results.


  1. Great article! I hear from freelancers all the time who have no idea where to start when it comes to pricing, and of course I hear complaints from potential clients about why design services are so "high." This blog spells out the work that goes into design and what undercutting can mean.

  2. Thanks Jennifer! I'm glad you liked it. I hope it helps.