3 advantages of value based pricing

Andriy Haydash — Mon, 27 May 2019 19:49:43 +0000

When it comes to pricing your web design and development services there are 3 main strategies you can use for pricing:

Hourly
Fixed price
Value based pricing

Today I'd love to let you know why value based pricing is the best strategy for you and your client.

When it comes to pricing your services, especially if you sell something expensive it can get tricky.
There is such a huge range of prices on the market starting from $100 per website services on Fiverr to 6 figure prices.

But what is the best website pricing strategy and how much should your client pay for the website?

I believe that doing a value based pricing is something that every developer should aim for.
And here are 3 reasons why it beats other pricing strategies:

It motivates you to work more efficiently. With hourly pricing it's not in your best interest to work faster because you will earn less. Therefore, the more you work - the more a client will pay you.
Think about it for a second. If a client pays you more it means that the value of project is much bigger. It doesn't make much sense because client is always interested in getting a quality product delivered ASAP to start making money from it. Therefore - the hourly pricing strategy is not optimal for any side.
Your client's budget is protected. If you don't deliver on time (and
as we all know things tend to get longer than expected in our business) - a client wouldn't have to pay you more because the price is fixed.
This will make him slightly happier than if you were to charge him :)
You usually can earn more. This is why the value based pricing is better than the fixed pricing - it is usually more profitable for you as a service provider.
Why? Because a fraction of perceived value is usually higher than a simple fixed price that you would've likely calculated using the following formula - hours x hourly rate.
This obviously assumes that you work with real businesses and not a mom & pop shop that sells homemade sandwiches in a local store.

Let me give you an example. Let's say you're a wordpress developer work with an insurance company and they plan to have a website created that will bring them $150k in revenue in the next year.
Then you can easily charge them $15k for your work even if it doesn't take a lot of your time.

On the other hand, you should have a minimum level of engagement - meaning that you won't work with very small clients (obviously if you want to - you can) because the value of your work to them is much lower.

I hope this article has been helpful :)

DEV Community: Andriy Haydash

3 advantages of value based pricing