5 Pricing Tips to Earn More on Client Projects

Oct 4 2012 by Ruben Gamez | 39 Comments

5 Pricing Tips to Earn More on Client Projects

Why is it that some agencies and freelancers can charge premium prices while delivering low-quality work?

We’ve all seen this time and time again.

It’s not hard to find stories of people paying tens of thousands of dollars for mediocre design or development. In fact, maybe you’ve inherited some of this work in the past and have had to repair it.

Sometimes clients aren’t satisfied with the results, but often — and this is the crazy part — they’re happy with the results, even if they could’ve received better work at a much lower price from you.

The truth is that price rarely has anything to do with the quality of work.

No, clients often pay a higher price for other reasons. Mostly it’s about what you offer, and how you’re offering it, that makes a difference.

Here are some great ways to give clients what they want so you can start charging what you’re really worth.

1. Charge Clients According to Value

If two clients ask for the same service, do you charge them the same amount?

On the surface, it seems like it’s only fair to charge based on the work you’re doing. But when you dig deeper, it becomes clear that you should never do this.

Let’s make this concrete with an example:

What’s the value of a simple 5-page website that brings in $20,000 a month in business?

It’s not the number of pages the website has, or the amount of time it took to design. The person who owns the website doesn’t care about pages or design time. So why base the price on things they don’t care about?

Instead, you should base the price on what the site is worth to the owner.

Each client who comes to you will get a different amount of value from your work. The price should be directly related to the amount of value you deliver.

Some good questions to ask (if someone wants a website):

  • How will this website help your business?
  • How will you know this website is successful for your business?
  • What specific numbers will be affected (revenue, leads, etc.)?
  • How much money is lost by not having a website (or keeping the old one)?

You want to uncover the business needs behind the project and how much real value it’ll contribute. This way, you can make sure that you’re billing what you’re worth and can deliver enough value to end up with a happy client.

2. Bundle Your Pricing

Now I’d like to talk about a style of providing a cost estimate to clients that I call the bundled pricing technique.

But first, let’s discuss two common ways freelancers provide project cost, and also the associated issues with them.

Emailing a Project Cost Estimate

Emailing the price estimate of the project is a popular way of telling the client how much the work will cost them:

Emailed cost estimate

Unfortunately, there are lots of problems with this approach if you want to bill at higher rates.

Some of the more obvious problems:

  • The lack of professionalism and thoroughness sends the wrong signal
  • If the email is short with little explanation, the client might think the price you sent them is arbitrary
  • Emailed estimates are often automatically disqualified by larger companies
  • There is absolutely no focus on the results/deliverables (it’s 100% about the price)

Invoice with an Itemization of Cost

Now let’s talk about the invoice-style estimate (another prevalent way of giving estimates):

There are also several problems with showing your fees this way.

To start with, you’re not telling your clients what value your services will provide for them. It’s hard to think about anything other than hours and price when looking at the above list.

You’re inviting the client to pick apart your estimate and go comparison-shopping to find a cheaper price.

There’s another problem: From a psychological standpoint, many studies have shown that people are more motivated to avoid losses than gains.

Loss aversion proposes that you’re likely to feel more pain by losing $100 than pleasure by gaining the same $100.

Going back to our invoice-style estimate, there’s a perceived loss in each line item when you show a price right next to it. That’s because:

Pain = Loss = Price

A Better Way: Bundled Pricing Technique

Alright, now that we’ve identified the things that we want to avoid, let’s look at what I think is a better way of presenting your fees:

The bundled pricing technique is one of the most effective ways of communicating value when presenting your fees.

Below is an infographic about this technique by the startup I founded, Bidsketch (a web app for creating project proposals). Click on the infographic to see a bigger version of it on our site.

Remember, the price is always going to be seen as a loss in your client’s mind. You can avoid focusing on the loss by bundling your fees into a single service with one price.

The key is to associate the price directly to the results your client wants (a single time).

The other critical part is to detail each service in the description area. Those services are what your client gains, so you want to show them off individually by unbundling the details.

3. Always Give Options

There’s a simple tactic you can use to increase your chances of getting a project and earn more revenue at the same time: Always give options.

If you present your client with a single option, you’re turning your service into a "yes/no" decision.

But when you give them three options instead of one, this changes the decision so they’re choosing the level of service instead.

They go from this:

"Should I hire this company for this price?"

To this:

"Which one of these will give me what I want for the right price?"

To make this work correctly, you need to make sure to follow some basic guidelines.

Take a look at what a good set of options looks like:

What kinds of results can you get from this? From our study of over 27,000 proposals and estimates, we found that one or two options result in 32% more revenue.
That tends to happen because most people pick the middle option when presented with three options.

Some important guidelines:

  • Pick options that enhance your base service: Think of your options as basic, enhanced, and premium options. Make sure they improve the service you deliver in some way.
  • The price difference in options should be significant: You don’t want a small 10% price increase in each option. If your clients give you a budget, make one option significantly more than their budget.
  • Options should contain a name, price and description: Make sure descriptions clearly communicate what the client will get by choosing that service. Focus on the business results instead of giving technical descriptions.

4. Never Decrease a Fee

A client will often say that the estimate is out of their budget. There are potentially two reasons for this:

  • They may not feel the service they’re getting is worth the price (see the first tip about pricing according to value).
  • They really can’t afford your services.

If they can’t afford what you’re offering, they may not be the right type of client for you.

On the other hand, if this project offers other benefits (maybe for your portfolio or introductions to other potential clients) and you’d like to work with them, you’ll likely be able to work something out as long as they have a reasonable budget.

Ask the client which service he wants to remove to lower the price. Never decrease the fee by itself just to work with a client; cut the amount of value they’ll receive instead.

You might be tempted to give a discount in this situation, but you’ll be undervaluing your work if you do so.

But that isn’t to say that you should never give a discount. You just have to…

5. Give Discounts the Right Way

There are times when a discount makes sense; you just want to be careful how you go about doing it.

There are two things to consider when giving a discount:

  1. Context
  2. Presentation

Context

Context is all about sending the right signal regarding what you’re worth and what behavior you want to encourage.

If you give a discount because someone is a new client, you’re starting the relationship on the wrong foot. You’ll have made a statement about what your time is worth and you’ve set a lower price anchoring that may be hard to change in the next project.

A better way is to give a discount if they pay everything upfront. This way you’re encouraging early payment and removing the risk of not getting paid later on.

Presentation

How you present the discount is the next thing you need to think about.

Take a look at these examples below:

Example 1:

Increasing Leads With a Landing Page – $10,000

- Includes 5% off Project for Early Payment

Example 2:

Increasing Leads With a Landing Page – $10,000

- Includes 75% off Social Media Marketing for Early Payment

Even if the discount is $500 in both cases, the second example will feel like a much better deal because it’s a larger percentage.

You can get this effect by discounting 75% off something of lower value — in the above example, let’s say that social media marketing costs $2,000 — instead of discounting 5% off the entire project.

So the rule is to discount something of lower value but make sure it’s for the right reason.

Putting it all Together

While any one of these pricing tips will work well alone, you’ll start earning what you’re really worth when you combine them together.

Remember what they are:

  1. Charge clients according the value they’ll receive.
  2. Bundle your fees into a single solution with a price.
  3. Give two or three options to avoid having a "yes/no" decision.
  4. Don’t decrease your fees without cutting down on the scope of the project.
  5. Give discounts for the right reasons and focus on the percentage.

Have you tried any of these pricing tips with your clients before? Are there any others that you’ve also found to work well? Share your thoughts in the comments.

Related Content

About the Author

Ruben Gamez (@bidsketch) is the founder of Bidsketch, a web app that helps freelancers create professional looking proposals in minutes. He’s also the author of a free guide that teaches freelancers how to get more clients with a perfect proposal.

39 Comments

Ricardo Diaz

October 4th, 2012

This was probably one of the best articles I have read on this topic. You offered solid advice that I have discovered through trial and error unfortunately.

Its worthy of a tweet and a bookmark.

Great job with this Ruben!

Forrest

October 4th, 2012

Thanks for the great article. I’m always searching for the best way to quote projects (always the worst part of the web design process for me). This will definitely have an impact as I move forward on how best to present project costs to my clients.

Kaelie Nielsen

October 4th, 2012

I guess I had better change my ways. Thank you for this post.

Jérôme

October 4th, 2012

Really good article ! thanks for the tips.

Ruben

October 5th, 2012

Thanks everyone!

@Ricardo – Many of us only discover these things after lots of trial and error (and several bad experiences).

@Forrest – While there isn’t a single best way, many of these methods have worked really well for a lot of people so hopefully you’ll see some of the same results when you implement some of these tips.

Casey Dennison

October 5th, 2012

Solid advice, my man.. I’ll be sure to bookmark this article and read over it every day.

Robin Jennings

October 5th, 2012

Great article Ruben. It’s not often you read such a detailed how to on topics such as quoting. Really appreciate it- just signed up to Bidsketchs mailing list.

Ravikumar

October 5th, 2012

Thank you for the great tips.

Hloom

October 5th, 2012

One of the best articles I’ve read, a lot to change in the way we do proposals. It’s funny how it now seems so obvious and you wonder why you did not arrive to this by yourself.

Too bad most of companies are already using proposal feature bundled with invoicing software (freshbooks, zoho) so a stand-alone service, however great it is, is not always convenient.

Thanks again for great article.

sanjay

October 5th, 2012

This is what I should remember every time “Don’t decrease your fees without cutting down on the scope of the project.”
Good points Ruben!

alvin

October 5th, 2012

great advice! thank you!

Luiz Gabriel

October 5th, 2012

Great post thank you so much, I have been doing many mistakes. Guess your article will change our small company.

bill

October 5th, 2012

awesome article thanks real eye opener to what ive been doing wrong!

Stephanie

October 5th, 2012

Thanks for the great article. I’ve always worried about the way I charge clients/how I should go about it.

This article definitely has opened my eyes and I’m definitely going to take this approach from now on.

JLMadison

October 5th, 2012

Great article. Pricing seems like it will forever be a mystery, but this gives very clear direction and concise points. Thanks!

isuru

October 5th, 2012

Great timing! I started freelancing pretty recently and I’m designing a site for my first client. I’ve been searching on the net and asking people about how to charge and I’m really pleased that I stumbled across this article. A great write-up. Learned some good tips. Thanks.

Hibam

October 5th, 2012

Thank you very much for sharing this information. I help me a lot to clarify many aspect of my bussines that I wasn’t doing so efficiently.

Tom Durkin

October 6th, 2012

This has really opened my eyes to pricing. I’m just starting out as a freelancer and always feel that I’m underselling myself. I had been sending over breakdowns of each part of the job as I thought this justified the overall price but I feel completely differently about it now! Showing the advantages is a great idea and love the discount tips, really cool!

Looking forward to sending my next quote out now :D

Anthony Guerra

October 6th, 2012

#4 is the hardest part for most people. I’ve seen people discount their products or services by hundreds and sometimes thousands just to make sure the potential client doesn’t walk away.

Excellent article!

Mark Gason

October 6th, 2012

Great article. Your expanded, one price proposal had one thing I would avoid.
“focus will be on increasing conversions” is fine, but twice you have “create a plan to double leads” This sort of quantifiable statement leads to dispute and non-payment when leads do not double.
Significantly increase leads, sure, double no.

Sean

October 7th, 2012

One of the better articles I read on pricing. Great job and thank you.

Mark

October 8th, 2012

Great Blog

I think with the recent Penguin updates the clients want to see what they are getting for their pound and freelance developers will need to totally justify their work offered.

Thanks for sharing

Earl Varona

October 8th, 2012

Wow, Great post! I do agree with you on this. Perceived value is what clients buy and actual value is what they”ll come back for more.

Anything Graphic

October 9th, 2012

I agree with Ricardo. Definitely one of the best articles on this topic. Well written and with really good points. Thanks for this!

Chris Clay

October 9th, 2012

Great article! One thing though – you’ve repeated the same image twice. The image in section 3 (“Always Gives Options”) is the bundled fees image from earlier in the article. I hope you can update the article to include the image showing the option examples you refer to in the text :)

David

October 9th, 2012

Superb article…the web has been calling out for something like this for a long time.

Sean Cook

October 9th, 2012

Yes, it is a psychological game we all play when dealing with a new client. You first need to establish trust that you and your team can produce quality results. Hopefully your website does this for you, but you have to cement that with good written and verbal communication skills. The above article definitely nails it on the head about the psychology of “sticker shock” versus “it was worth every penny”.

Most of the time is usually spent qualifying a client to see if their budget can approach the value we bring. From there, we decide to pursue or let them go/refer them to another colleague. Upon perusing, we find a combination of price and thorough descriptions are well received. This is AFTER, they agree to one of our package offerings.

Good article!

Mark

October 10th, 2012

Thank you for this article! This is the most informative and insightful looking into proposal strategies that I’ve seen so far. Extremely useful; I’m going to prepare my next quote/proposal with most, if not all of your suggestions.

Jacques D'SIlva

October 10th, 2012

We’ve faced these endless challenges before. And the best way we believe that we’ve helped ourselve, to give the proper price rate to clients is to look into the mirror and tell ourselves, that we are worth it!

Jacob Gube

October 11th, 2012

@Chris Clay: Hey Chris, nice catch, thanks for noticing that and leaving a comment. That was my fault – the image was mistakenly repeated twice when I put it up on WordPress. I’ve now put the correct image.

Johan

October 12th, 2012

Nice.

Will use the “3. Always Give Options” pointer shortly for web services. Right now I have 1 offering, but will make them 3. With enough price difference between them.

Thanks!

Sasha Endoh

October 14th, 2012

Thanks for the indepth article! I was wondering if you could expand a bit more on “If your clients give you a budget, make one option significantly more than their budget.” Is this in hopes of upselling?

I’ve been doing a mixture of techniques you mention as I like to provide time estimates for various components of a project (not in hrs but day/weeks) to give the client an idea of deliverables schedule and project timeline. Do you deal with time estimates separately, and how detailed (or not) are do you go?

Thanks again for the great article!

Stephen Howson

October 14th, 2012

I agree with most of the comment above. Fantastic and very well written article. I’m probably going to try implementing this sort of proposal ‘options’ rather than yes/no myself as of tomorrow :)

Amanda Dyer

October 14th, 2012

Very helpful tips. Some great thoughts on discounting I hadn’t considered as well. Thanks for the in-depth article!

John R

October 15th, 2012

Excellent article, it is very helpful to me and the timing is perfect. Thank you very much.

Full Throttle

October 17th, 2012

Awesome article! Thanks for the tips!

Pixel Creative

October 18th, 2012

Superb article I have book marked it for future reference

Kelvon

November 19th, 2012

This article is really useful. Determining the price of your services is fairly easy but when it comes to explain it to clients, many freelancer muck up. I will apply the bundle technique in freelance writing as well.
Thanks

Ruben

November 19th, 2012

@Sasha

>> I was wondering if you could expand a bit more on “If your clients give you a budget, make one option significantly more than their budget.” Is this in hopes of upselling?

It really mainly is there to serve as a price anchor. Basically, the very high price point will make the other lower priced options feel more like a deal. And you never know, they may like what you’re offering at the higher price point so much that you’ll actually get them to go above their initial budget.

>> Do you deal with time estimates separately, and how detailed (or not) are do you go?

I’d say that it’s great to work out a sort of project timeline in your estimate/proposal but there’s no need to get specific about the number of hours you’ll be working. Basically, the client wants to know when they can expect certain deliverables, what those will do for their business, and how much it’ll cost.

If you need to give a time estimate try to quote a daily (or better yet, a weekly) rate instead of an hourly rate.

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