When building a branding agency, there are many factors that need to be considered. The choices that you make will impact your agency and the way it is viewed by others, so you shouldn’t rush to make a decision. Take your time and make sure you choose correctly.
The factors that need to be considered include who are your clients going to be? What services will be offered? And most importantly, what is your pricing model going to look like? Why is this the most important decision you will need to make? The pricing model you choose will impact every aspect of your agency.
Choosing the right pricing model is a difficult process and cannot be rushed. This guide is here to help, so there is no need to be worried. Keep reading if you want to know how you can select the right pricing model for your digital branding agency.
What Are The Different Pricing Models?
There are many different pricing models that you can choose from. Keep reading to find out more about each one of these pricing models so you can choose the right one for your branding company.
Hourly Pricing Model
The hourly pricing model is one of the most basic pricing models around and it is used by my different businesses in different industries. Discipline, reporting, and coordination are essential for an effective hourly pricing model for your brand design studio.
Hourly pricing is only effective when you have accurate data. You must meticulously monitor your time and costs, as well as check in with your customers on a regular basis. If this isn’t something you can do or if it’s something you don’t want to do, then the hourly pricing model is not the right choice.
The hourly pricing model is the right choice if:
- You are doing complex technical work
- The project scope has changed many times when talking with the client
- The deliverables for the project are not clear
- You are working with the same client on a regular basis
- You are working on similar projects with different clients
Advantages of the hourly pricing model:
- Easy to sell to your clients
- Simple and easy to negotiate
Disadvantages of the hourly pricing model:
- Difficult to scale pricing to different projects
- No incentive to work harder and get work done sooner. The sooner you complete the project, the less you get paid.
Project-Based Pricing Model
This is another basic pricing model that you can use for your creative brand agency. As the name suggests, it is a project-based or a ‘flat-fee’ pricing model. For example, when a client asks how much a project will cost, you will tell them the cost is $1,000 and then you will charge them that specific amount regardless of the time or expense spent on the project.
The downside of this method is that when this pricing model is used, the amount of work needed to be done is usually underestimated and the business ends up with unnecessary adjustments or unforeseen problems that they will have to deal with without being paid anything extra for the trouble. This can result in no or less profit being made for the undertaking of the project.
The project-based pricing model is the right choice if:
- You are certain that you can get the work done sooner than the client’s estimate
- The client is repeatedly asking about the cost of the project upfront and needs to know the cost before hiring your business.
- Your business works on projects with clear project deliverables
Advantages of the project-based pricing model:
- Simple and easy to negotiate
- The pricing can easily be scaled based on the project
Disadvantages of the project-based pricing model:
- Projects are usually underestimated which can lead to a loss in profit
- High prices will lose you clients
Retainer Pricing Model
The retainer pricing model is a pre-determined and pre-billed charge for a specific time frame or amount of work that needs to be completed. This can depend on time – for example, the customer decides to purchase 200 hours per month for your service at a rate of $50 per hour. This can also depend on value – for example, the client may need specific deliverables and they will pay you $5000 per month for those deliverables, no matter how long it takes.
Clients like working with the retainer pricing model because it simplifies budgeting for them. They will know exactly how much they are expected to pay your business per month and when they need to pay it. This makes the whole billing and payment process simple and straightforward. Some clients don’t like working with the retainer pricing model as the higher priced project costs are out of their budget and can seem intimidating.
The retainer pricing model is the right choice if:
- You already have an existing relationship with the client
- You work with clients that have bigger budgets
- Your branding design studio can produce high volumes of work every month
Advantages of the retainer pricing model:
- Income is guaranteed each month
- The retainer fee is paid upfront
- The price can easily be scaled based on the project
Disadvantages of the retainer pricing model:
- Harder to convince new clients to use this pricing model for their project
- If the retainer is based on deliverables and not time, then profitability can be lower if the deliverables take longer to be delivered than was estimated.
Conclusion
When you are choosing a pricing model you can take your time and test which one is right for your business. You don’t need to choose upfront and immediately. You don’t need to stick to the pricing model that you choose first either. You can also use different pricing models for different clients. Your pricing model will continue to evolve with your business.