In order to be successful in any business, you need to price your products accordingly so that profit margins are high enough to keep the business healthy and growing.
This can be trickier with a creative services business. All web designers and web design agencies eventually have to figure out how much their work is worth, how much they can charge clients, and what type of pricing structure they should have. Many companies, including my own, have experimented with different pricing structures and plans to determine which works best.
How to Determine the Value of Your Services
To start, you must determine how much your services are worth in the real market. One way to begin this process is to indentify your key competitors and investigate how much they charge.
Next, you should compare the quality of work each offers and determine if you truly offer something more valuable than your competitors do. Everyone thinks their own company has the best services, but when it comes down to it, there are a lot of similar companies out there and very few that are in the league of their own.
If you do not have a clear advantage over your competition, don’t think you can price your services much higher than they do. Start slowly and be fair. Over time, customer satisfaction and positive buzz can give you an edge and allow you to raise your rates.
In the beginning, your best bet would be to average the costs of your closest competitors and start from that benchmark. You will then have to determine if that price will produce acceptable profits for you or not. If your profit margins are slim, often it is simply better to charge a bit more and focus on fewer clients than to kill yourself over paper-thin profit margins.
The information provided on Study.com’s website about different pricing structures could be valuable to you in determining how you should price your services.
If you have determined the correct pricing structure, the next step is to decide if “buffet style” pricing makes sense for your company.
What Is “Buffet Style” Pricing?
When I use the term “buffet style,” I refer to the practice of charging a higher flat fee that includes multiple services bundled together, but that not all clients would necessarily need.
To put it into perspective: think of the popular buffet restaurant Golden Corral, which charges about $11.99 per person for a dinner meal. While you might think that is a great deal, consider the fact that the majority of their customers will probably not eat $12 worth of food in one sitting. That’s what the restaurant is banking on and that is a pricing model that might work for you as well.
As far as web design goes, many design agencies already implement these pricing models. For example, they might charge $5,000 for a website redesign OR $6,000 for a website redesign, a logo design, and a set of banners. When you compare the two options, the $6,000 deal looks like a much better value because it includes more services for only a 20% higher price.
As a business owner, your goal would be to not have to design a logo and a set of banners with every website redesign, but if the client needs it, it should be there for them to take advantage of. So if every third client doesn’t ask for these extras, you’re still making more money because you’re essentially charging an additional $1,000 for a logo design and a set of banners per client.
Although I am just using example numbers to illustrate my point, you would have to determine what would work best for your design firm. Whatever you do, you need to make sure you are still making a decent profit even if each and every client decides to use all of the services included in your plan.
Other Examples of “Buffet Style” Pricing
I have noticed many web-hosting companies implementing a similar strategy. Their plans usually include a “free domain registration,” but the fact is that many people looking for web hosting already have the domain registered so they do not need that service.
If you look around the web a bit, you will find many other industries implementing similar pricing strategies in order to maximize their profits.
If you are a web designer or own a design agency, do you think this method of pricing will work for you? Why or why not? Let me know in the comments.
