Book Yourself Solid Illustrated: The Fastest, Easiest, and Most Reliable System for Getting More Clients Than You Can Handle Even if You Hate Marketing and Selling by Michael Port

Author:Michael Port [Port, Michael]
Language: eng
Format: mobi
Publisher: Wiley
Published: 2013-03-27T14:00:00+00:00

Pricing Models

I'm sure you've seen a number of different pricing models employed in various service industries. Some seem to benefit the provider and others are more favorable to the client. However, the picture of perfect pricing has each party thinking that they got the better end of the deal. If the client thinks he snagged a deal, he'll be tickled pink and if the service provider thinks she's scored, she'll feel like the cat who ate the canary. The key is to figure out how to create this win-win dynamic so that both parties feel fortunate. Here are a few of the often-used pricing models for selling professional services:

1. TIME FOR MONEY TRADE. A rate is set for a predetermined, agreed-upon amount of time—hourly, daily, weekly, or some other combination thereof (for example, $100 per hour, $1,000 per day, $10,000 per week). This is a very common model and one with which clients are generally comfortable.

2. OPEN-ENDED TIME FOR MONEY TRADE. A rate is set that trades your time for money, usually hourly, but no constraint is put on the amount of time required to complete the job. Service providers (especially contractors) like this model for the same reason that it petrifies the client—runaway time piles on additional fees. You know that three-week kitchen remodel that's going on thirty-three weeks? No one likes surprises that cost them money. Imagine, instead of getting gifts on Christmas morning, you woke to find you had to pay for every box that had your name on it.

3. FIXED PRICE FOR PRE-SET RESULT. A price is established for the entire project and fees are usually paid in percentages at predetermined dates or upon completion of project milestones (that is, 25 percent up front, another 50 percent halfway through, and the remaining 25 percent upon completion). This model often causes anxiety for the service provider for fear of “project creep” (aka: functionality creep, feature creep, scope creep, and mission creep). This is when the scope of the project gets bigger and bigger but the fee established stays the same. It's different from working on a project with a creep. That sucks, too. Which is worse, however, depends on how much creep or creepiness occurs on the project or with the client, respectively.

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