I admit it! We love value-based pricing and for many good reasons. But value-based pricing isn’t the only way to price your services. Choosing a pricing strategy can feel daunting. In this series, we’ll take a look at some common pricing strategies used by agencies, consultants, and freelancers. We will list their pros and cons to help you choose the best strategy for you.
Pricing is perhaps the most under-appreciated skill when it comes to selling services. Generally speaking, agencies and freelancers don’t think enough about pricing strategies. Most simply don’t question how they price or why and just do what everyone else does.
Thing is, spending just an hour thinking actively about pricing will help you earn more without working more.
Now, as you may know, many posts on this blog cover various aspects of value-based pricing (also called value-pricing). I understand that the sheer number of words I’ve written about value-based pricing can seem intimidating. Don’t let that stop you from at least actively consider your pricing practices – whatever they may be. Even if you decide to stick with hourly pricing, there are always ways to improve your pricing.
There are tons of ways to be creative when it comes to how you price and use pricing strategies. Let’s check them out!
Four Kinds of Pricing Strategies: Effort, Performance, Value, and Subscription
I’ve divided this series into four parts, each covering a different pricing strategy:
1. Effort-Based and Hourly Pricing
The first part covers so-called effort-based pricing. This is what most people do without even thinking about it. It usually takes the form of being compensated for the time spent doing something.
Effort/Hourly Pricing: A Not-Great but Surprisingly Popular Way to Be Paid
2. Performance, Contingency and Equity Pricing
The second part covers performance pricing. This is the kind of pricing that hinges on showing a measurable improvement for the customer and being paid a share of that. This also includes work-for-equity terms when the client gives you a share of a company in return for your services.
Performance Pricing: Betting on How Good You Actually Are
3. Value-Based Pricing
The third part covers value-based pricing. This is our holy grail of pricing as it captures the actual value you create for clients.
The Value-Based Price: How to Profit By Solving Real Client Problems
4. Subscriptions and Retainers
Finally, we’ll cover subscriptions and retainers. These are forms of recurring pricing and are a fantastic way to create a dependable income stream for your business.
Retainers: Useful But Never “Easy Money” Recurring Revenue (MRR)
Now there are more ways to price than these four. But to build a successful freelance or consulting career, or run a profitable agency, these are the ones you need to know to begin with.