This blog expands on the many pricing strategies freelancers can utilize and aims at helping freelance designers with pricing strategies.
Many freelancers consider determining a price for a design product daunting. A lack of confidence in the price offered, reluctance from the client, or general discomfort when discussing money are all common factors that make pricing feel like a chore. Despite this love-hate relationship with pricing, it remains a vital and essential tool to your freelancing career and its longevity.
The price you ask of your clients is the amount of money that you believe compensates you fairly for the work you produced. This compensation, when understood and utilized properly, affects the type of potential clients who approach you or don’t, thus affecting the type of projects you are and will be receiving and ultimately adding to your professional portfolio.
This blog is intended to shed light on pricing as a tool to achieve your goals as a freelancer. Here’s what I’ll be discussing:
- Importance of Pricing
- It Starts with Yourself
- Pricing Strategies Out There
- Where is Your Price Coming From?
- How to Price?
- General Pricing Tips for freelancers
Importance of Pricing
The price you set for your work is not only the amount of money you charge for your work. Embedded in it are the types of potential clients you will work with, and the value you place on your work and brand. A price indicates to the client where you, as a designer, are in respect to other designers in the field and indicates the level of work they should expect of you. When pricing effectively, you can portray value and instill confidence about your work in your potential, therefore convincing them that you are the best person for the job.
It Starts with Yourself
I am one designer who used to have a hard time pricing my next project, simultaneously; I would be working on another project where I would feel my compensation isn’t fair and that I undervalued my work, which was discouraging, to say the least. After a while, I realized one of the major obstacles to my pricing approach was that I always thought I was lucky to get the job therefore I would concede to a minimum. While this might have been true at the beginning, I never changed this mentality afterward despite my growing experience. This mentality became my weakness, and I later realized that it filtered out subconsciously to my clients!
Once I became aware of this I responded in a multitude of ways, however, the most effective change in myself happened when I shifted the way I talked about myself. A trick I used was that I started thinking of myself as a brand and business entity rather than a person, which meant that I distanced myself emotionally from my work and gained clarity and objectivity when assessing anything related to a new design project. Thinking of yourself as a brand automatically shifts your perspective and provides a clearer and bigger-picture outlook on your decisions, including pricing. Asking yourself questions like ‘is the set price justifiable’ or ‘what this price will convey’, or ‘what value is the branding adding’ becomes relevant and necessary in understanding why you make a decision.
When making executive decisions, such as ones related to pricing, distance yourself from your work and think like a business person instead of a designer. A freelance career is very similar to a startup in terms of risks and operations, so you have to be swift in your responses, agile, and adaptive to ensure the survival and growth of your ‘business’.
Pricing Strategies Out There
There are many ways that a freelancer, like a business, can base their price on. These different strategies help you determine what your price should be. Here are some of the more common and relative strategies freelancers can utilize:
This pricing strategy bases the price on what your customers think your product is worth. The idea is if they think your work has great value then they will be willing to pay a large fee for your work.
This is a very common starting point for many designers. You set your price based on other designers’ prices and where you are on the skills spectrum relative to them. It’s a useful strategy when starting out, but it can be tricky in the long run especially if you want to grow your freelancing gig.
Cost Plus pricing
A very common way to price your output is by adding up the costs involved in your project and then adding a percentage markup to that amount. These costs involve maintenance of whatever tools you need, new gadgets, transportation costs, venue rental, outsourcing other freelancers, etc.
One common strategy used by many freelancers who are just starting out is to offer clients very low prices, lower than competitors’ prices, in order to secure a large volume of work. This can be helpful for many designers who are looking to expand their portfolios and learn from as many projects as possible.
This strategy is ideal for senior and experienced designers, who can set high and premium prices on their design services. Premium pricing limits the number of clients but increases the value of the designer’s work exponentially. It creates a sense of high value and exclusivity for the design work and makes the designer stand out, therefore, appealing to high-paying customers seeking an exclusive designer.
Designers can use this strategy when a project involves more than one output; it encourages clients to get a package deal instead of paying more for each service independently. Such an approach can be used by graphic designers to create corporate packages that include a logo, merchandise, and t-shirts for companies.
This strategy depends on time as a determining factor. A designer would ask for a specific amount of money per hour and would then get paid according to how much time they spent on the task. This is a strategy that most freelance designers tried; however, its usability is debatable in the long run. Many argue that this strategy devalues the work of more established designers who’ve gained skills and experiences that allow them to make the same output but in less time.
Where is your Price Coming From?
Freelance designers differ in the ways they charge their clients, depending on the type of design output they create, the geography and its best practices, and what they’re trying to achieve at a specific stage in their career. Although many freelancers inherently alternate between pricing strategies, these strategies are not always planned and directed to make the most out of the present and fulfill a designer’s goals for the future. Therefore it is no surprise that many freelancers find themselves controlled by the terms of projects they receive rather than the other way around, or simply making pricing decisions following each project without a clear direction.
To get to a good price that you believe reflects your work, is fair, and gets you to the projects you want to work on, start with defining your goals and identifying your customer segments.
Step 1: Identify Your Business Goals
Where are you going with your freelancing career? What are you trying to achieve? What is the timeline for these goals? (Remember that a goal is all talk if it isn’t SMART; Specific, Measurable, Achievable, Relevant, and Time-specific).
I know, you might be thinking ‘what does this have to do with me knowing how to price my next project?!’ but believe me, it makes a difference. The earlier you start with this process the better the results you have. Such questions put your work into perspective; they help measure progress and understand what your potential is. You don’t have to know everything, especially at the beginning, and your goals can change, but the important thing is to understand this change and use it to your benefit.
Step 2: Understand Your Value and Whom it is directed at
Determine your value metric
Think of the phrase ‘charge per (blank)’, what would you place in the blank? Is it per illustration? per project? per hour? or per video? What is the unit of value for you? It is possible that each output might have a different price, however the important thing here is to determine what you are charging for.
Who are your clients? Create your customer profiles
Understanding whom you are targeting as a client is essential in placing yourself on the road to success. Practically speaking, you can’t fulfill the needs of every person approaching you with a proposal, so which of these people would you consider a missed opportunity, and which of them wouldn’t matter if they walked away?
You can do a simple exercise that many businesses and marketing companies utilize to help with this. Firstly, identify the types of customers you want to work for as a designer and create profiles for them. An example would be, if you’re a videographer who wants to work strictly in the fashion industry then are your customers luxury designers, up-and-coming designers, or fashion companies that have multiple labels? Identify each segment; add details such as their sectors, scales, what they value most, what makes them special, who their target consumers are, and what they are looking for, you can add any other feature you believe is significant and is important for you to keep in mind. You can include monetary factors such as their budgets or expenditure for projects that involve your work.
Once you’ve identified these customer profiles, group them into segments if possible and place them in a table with the customer segments in the columns, the following in rows: most valued features, least valued features, willingness to pay, market value if possible, and any other metric or category you think is useful in the rows. By seeing the clients you have and want to have, you begin to see where you want your career to go and who you need to work with to get the projects you want. It will indicate what you need to do when approaching these potential clients and how to appeal to them, including how to price to convey the value and image you’re aiming at.
How to Price?
There are several ways you can choose to price your work.
Method 1: Get paid based on an hourly rate
The hourly pricing strategy is commonly used by designers, especially on freelancing platforms, however might not necessarily be calculated properly. To be fair to yourself, an hourly rate needs to take into consideration your expenses for the entire year.
If you create an annual budget for yourself, you could have a clear image of what your annual expenses are: rent, transportation, vacation, maintenance of gadgets or machinery used for your work, living expenses, insurance..etc. These are the costs your ‘business’ needs to cover annually to ensure survival. Once you calculate your costs, use this simple formula:
Cost Per hour= Total Annual Costs(number of working hours*number of working days*number of months)
You can then multiply this amount with a percentage profit
Price Per hour=cost per hour +(cost per hour*percentage profit)
Although you might not utilize this payment method, it is useful as a designer to know your costs per hour. It can be used as a base for your prices alongside other pricing strategies to ensure that your costs will be covered no matter the profit margins. For example, let’s say you calculate your hourly rate at $40 for any project. If you get a project with an estimate of 8 hours of work total and some extra transportation and rental costs at $200, you can utilize the Cost-plus strategy. This means that your total costs would amount to $520 and with a markup of 20%, your total fees for a project would be $624.
Method 2: Calculate your fees based on the market
It is very likely that you will come across a new type of service that you haven’t performed for a client before and therefore you have no idea what price to ask of your client. In this situation, competitive pricing strategies can be utilized by asking around about the market price range for such a service is. Knowing the range of prices of a certain design service allows you the opportunity to compare between the different price ranges and understand why each designer is requesting a specific price. Consequently, you can place yourself within these ranges according to the quality and speed of your work and understand what will have to be done to ask for a higher price.
If you are considering growth and development which can include going into a new client segment then you will have to reevaluate this approach to pricing since it might not be the most compatible with what your clientele will expect or value.
Method 3: Your price will depend on the client’s budget
There are times where you come across a client who wants you to perform a task or project for a price range way beneath your set or expected one. Consider this: what type of impact will this project have on your career? Will this project help you achieve your business goals? Is the client part of your client segments and will therefore bring more similar opportunities your way? What will a reduced price communicate to this client? How will you cover your costs if you take this project? You should understand the impact of a reduced fee and accordingly decide to agree or not.
Method 4: Quantity over Quality
Penetration pricing is a strategy utilized by many designers who are just starting out, especially online. It is why you see graphic designers going for $5 per logo design, which you know for sure does not cover whichever costs a designer needs to fulfill a design and can undervalue the design process and output. Despite the disadvantages of such a pricing strategy, they provide two key advantages: volume and space to experiment. Volume to build your work portfolio regardless of how much time you spend on each project or assignment, and the space to experiment with prices, types of clients and projects, and market.
Combine Strategies when Suitable
Like the example in Method 1 (mentioned above), you can combine multiple strategies when it comes to determining a price or a price base that covers what you need. Another example would be combining Bundle Pricing with maybe a Freemium strategy, providing a product free of charge to the client. Some book cover illustrators provide a free 3d mockup of a book cover design alongside an ebook and hard copy cover page design bundle. Doing so creates a sense of missed opportunity to the client which would drive them to choose said designer over others.
NEVER work for free
No matter the price reduction you provide on your work (and it should not exceed 20%) or the low fee you are asking for a design (i.e $5 per logo) NEVER work for free. This is because firstly, your work costs you time and your time is not for free. Secondly, you are selling a commodity that has value in the market and by choosing to remove your price from the equation, your work loses value. Surprisingly, many people place a higher value on products or designs that cost more money; this means that you are hurting yourself and your career by saying you can work for free. Not to mention, you facilitate the exploitation of other designers by saying that it’s normal for clients to get design work for free from designers, which is not okay.
Localize your Price
This is a useful strategy, especially when working overseas in countries with a lower exchange rate and cheaper overall costs in the market. This means that you should make sure that what you are asking of your client is relatable in their own currency, which can be done by adjusting your scale, especially if you want the client. Markets that do not value design work will not justify paying higher fees for logos or illustrations since they do not see the value in doing so; this also applies to clients from different city scales or different states. Adjusting your price or scale is not a requirement, in fact, many freelancers don’t and have a set fee regardless of their client’s background. So make sure that you act according to what you believe is in your best interest, financially or in terms of portfolio or experience.
Re-evaluate Prices after each Project
Spice up your pricing game! When you are working towards growth and sustaining a good flow of projects in your career, it is important to constantly re-evaluate your projects and the prices you charge for your design work. Assess whether the price was fair or not, if you felt that you spent so much time on it for low returns, or if you miscalculated your costs. Doing so helps you better prepare for upcoming projects, learn from your mistakes and develop your pricing strategies to better balance the workload, your goals, and your customer segments.
This is the phrase that I end this blog with “price matters”. Although it can be confusing at the beginning of a freelancer’s career to choose the right price, believe me when I say, it will get easier and you will become more confident in demanding the price you want. The first step starts with your mentality towards your career and belief in the value your work brings to your clients. Afterward, spend time identifying your goals and understanding your clients so that you can act accordingly. Pricing is a tool you can use to your benefit, to bring growth and get you the projects you want to work on. So use it wisely and don’t be afraid to experiment and learn from your mistakes.
If you have a different approach to pricing, have an interesting experience others can learn from, or simply want to add to the conversation, share your experience below or join FLAN’s community on discord! You can also email me at firstname.lastname@example.org, or connect with the Flan community at any of our social media pages on LinkedIn, Facebook, or Instagram.