Pricing strategy from the pros: 3 entrepreneurs share their pricing method

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I’m sure you know the marketing gimmick by now: the reason most retail stores price items at $99.99 instead of $100 is that it tricks the average consumer’s mind into believing an item is cheaper than it is.

But does this pricing method work for freelancing as well?

Does charging $249 – or $249.99 – instead of $250 bring in more clients?

I contacted three highly-respected, veteran designers to get their input.

Here’s what each one has to say (PS, I’d also love to hear if you go with whole numbers or a .99 approach. Leave a comment on this post!):

Becky Livingston

Becky Livingston, Royal Apple’s Marketing’s founder and CEO, has more than twenty years of experience in marketing and communications as well as a strong background in technology. She can also be found doing public speaking gigs across the country.

Here’s what Becky says:

“When I price projects, I try to use a #+5 or a whole number, meaning I may have an item that could be $150, but I price it at $155 or $145. If it’s a big ticket item I use $1,500 versus $1,499. Why?…in some instances clients want to pay for services over a period of time. By rounding the numbers to more “whole” numbers, there is a better chance to split payments in to thirds or even fifths if needed.

I have read a lot about the marketing pricing strategy to keep numbers from being “whole” numbers, but find it’s very tedious for my clients. Thus, rounded numbers that allow for easier splits works best for me.”

Preston D Lee

Besides founding this blog and posting non-stop awesome advice (my words – and I think you’ll agree), Preston works as a full-time marketer/designer at a record label and film distribution company. He also runs a number of part-time internet businesses and does freelance web and graphic design.

Here’s what Preston has to say:

“I actually try to be as accurate as I can. I’ve found if a client sees a number like $999, they assume I just guessed. But if they see a number like $842, they figure I took time to calculate how many hours it would take and they’re more likely to trust my quote and less likely to talk me down. Of course, that requires honesty and extra effort in actually determining that number.”

Michael Pingree

Michael Pingree has over fifteen years of small business experience. His business, Pinson Digital, is a one-stop shop for inbound marketing solutions as well as web design and print procurement.

Here’s Michael’s take on it:

“I recently read a very interesting article about pricing strategy that advised against using round numbers like $1,000 as potential clients tended to view it as nothing more than a made-up number. However, if you quoted $987.24 for example, they believed that you had priced out each and every component of the job and that they were getting a “real” price.

I have used this strategy for my quotes in recent months and have found that the client has been much less likely to question the quoted price. In the past, clients would want to see a breakdown of the prices, but with the new system, no one has requested that.

My quote-to-job ratio has stayed about the same, so I can’t say it has helped get any jobs, but it seems to have eliminated price as a friction point.”

What this means for you and me

After talking with these veterans, the most important takeaway (for me) is to put time and effort into your quotes. Don’t be so hasty to get the email off that you rush through the quote and provide information that might be construed as flimsy or fabricated.

Secondly, testing different strategies is a great idea.* See which pricing method produces the best results or simply creates less headache and haggling. Stick with the strategy that works best for you and your clients.

*Note: I find it best to test on potential or troublesome clients. This way you don’t risk upsetting the clients you’ve already got a great relationship with.

PS – If you’re looking for more great advice on pricing, check out these GDB posts:

What Works Best for You?

How do you price your projects? Was I right in my assessment?

Have you tested pricing methods and found the best solution for you?

Leave a comment on this post and let’s talk about it.

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About April Greer

April is a go-to freelance designer with a rare combination of creative expertise and technical savvy. She is available for subcontracting and speaking engagements – visit Greer Genius for more information.

Comments

  1. Great article!
    For actual designing, I usually price by my hourly rate + a block time (of how much time I need to successfully complete the design) that usually balances out to an even number. However when there’s printing cost included, I keep the cost true down to the cent, that way when I the same job is revisited the pricing is consistent which gives my clients more peace of mind that there are no “surprises” when they are ready for future projects.

    • Dionna,

      I have a similar approach – an costs associated with the project I pass directly on to the client to the penny, but I provide a per-project quote that’s a “rounder” number.

      Thanks for sharing!

  2. I agree wholeheartedly with Preston,Michael and Dionna’s comments. For example, my last invoice totalled $223.08. I DO put much time and thought into my quotes and calculations as well as keeping very detailed logs of time spent and exact work done down to 15min intervals. When or if I am ever queried on price (which so far has not happened after 2 years of freelancing) I can confidently produce a detailed description of where every cent has been invested. This works perfectly when based on complete honesty and transparency.
    This can also help with clients who are not fully aware of exactly what is involved with those “simple changes”… you know the ones – where ‘just adding another sentence’ can mean a major overhaul of what was a beautifully balanced design in readable font…?!
    My partner (technical guy) has an interesting philosophy which immediately puts a lot of people into viewing hourly rates in a whole new perspective. He explains that the work is free – he just charges for his time which can never be replaced. Seems to work.

  3. I give estimates, not down-to-the-penny quotes. But when it comes time to bill, especially for those tasks that are billed at an hourly rate rather than flat fee, I always give the exact to-the-penny number.

  4. Great article. The great thing about your articles are, they are targeted at freelancers, but we being a small knit private limited company , find the content very useful and insightful. Almost all your content are very today and practical, which is a great help for anyone who is a practicing designer weather he is a freelancer, or part of a set up. As they say, knowledge can always come handy. Thanks again and keep up the good work.

  5. Jabulani ndlovu says:

    I am a graphic designer, residing in South Africa (Limpopo). Well, I have not really tried price methods, sometimes I find it hard to give my clients fixed prices and I don’t know how to go about it, maybe you mught give me some tips (will be much appreciate).

  6. there are no gimmicks in the design business. i quote flat figures which is easier to negotiate and offer payment options. retail tricks are not for creatives who sell great work, not products off a shelf.

  7. So nice when an article reaffirms ones practice! Worrying about pricing and if your leaving value on the table unpaid for and wondering what others charge, or why you didn’t earn the quote seems to be a constant in our industry.

    I wonder if any of the professionals interviewed use any type of time tracking software… like FunctionFox? Do they come about their rates by understanding what the market will bear and/or gaining an understanding of what their competition charges?

    Michael stated, “In the past, clients would want to see a breakdown of the prices, but with the new system, no one has requested that.”. What is the new system he’s referring too?

    Thanks April and thanks to the professionals for their insights.

    • Vickig– Many of my jobs have a design element, a print fulfillment element and a shipping element to them. In the past, if a job had a price of $986.24, I would round it up to $990. It was that price that would frequently get questioned. Now, I quote a price of $986.24 and I never get questions about the price.

      I do use time tracking for internal purposes. I tend to get a lot of repeat clients and as we all know, each client will require different amounts of time, even for the same type of project. I use time tracking to ensure that if a client has a history of needing more of my time to get a job done that I compensate for it in my bid.

  8. I really like this advice. I really dislike prices that include .99. It seems like the person selling the item is trying to fool me into giving them more money, and comes off as a little insulting to my ability to do math. I definitely agree that a price like $842 looks like an accurate number. For me, the $999 price also looks like an attempt to fool me into spending more money than necessary.

    • Ryan,

      I feel the same way, but without trying to sound elitist, sometimes the general public is easily fooled. Thus it’s useful to price accordingly to what your customers respond best to, even if you personally don’t agree with it.

  9. Good advice, Due diligence of how long things realistically take is a must and it does indeed give the client a feeling that they’re getting a fair deal. I set an hourly rate based upon what other freelancers in the area are charging. I don’t charge what full agencies charge since I have less overhead. Then I will go through how many hours exactly it should take. Based on the tasks involved some padding will need to be built in. For technical considerations I try to do some tests of concept before sending a proposal and add this into the price. Better to work it out with a quick test early than get the job and discover it’s not feasible within the budget or worse yet, impossible. You shouldn’t do it for free but a client once told me that an agency that worked for them did discovery up front and kept track of the time. This in turn went into the proposal and contract. For creative, the padding is based upon revisions. I build in one design and two revisions, however with new clients it’s a good idea to figure out how long it will take if one of the revisions is a “back to the drawing board” revision and add that in. It should not take as long as the first mock-up since the elements are there and you will have received solid feedback from the client. Just a couple of things I’ve run into over only three years as a full-time freelancer.

  10. I charge by the hour and I use an Excel spread sheet method which is dead accurate. I start the clock by pressing CTRL +SHIFT+ semi-colon and then stop it in another column. Each row has a description field of what I did that session. The spreadsheet auto calculates each session’s columns to give me a running total. This has proved very handy as a way of making clients aware of when I am approaching the quoted price. I find this works really well as there are no sticker shock surprises if we get close to going over the target. I can also use it to charge different rates for different activities if I so choose, as each task can fall under a few preset categories. One other benefit is this type of tracking helps make me more aware of the numbers and I find my quoting accuracy has greatly improved.

    I have a question for all the Graphic Designers out there: Do people charge for client communication sessions, like assessing clients needs, communicating iterations and changes, etc.? I have noticed in my time tracking that communication time is between 15-25% of any job I do.
    Thanks for the article and thanks for sharing everyone.

    • Dave,

      I always include in the price administrative costs such as project management, file setup, communications, etc. I find that my average project requires about an hour, while larger projects (or my higher-maintenance client) requires a larger amount and therefore I increase my price accordingly.

    • Dave,
      In response to your question – I include production meetings, phone calls, emails, etc., into my time. It’s all time you are devoting to that client.

  11. There’s a difference between selling a product (or even print job) and charging for design work. As a designer who also does lots of (my own projects’) printing, the kind of numbers I’d use are:
    For design / creative (I charge per project, not per hour) — $375 or $380 or $425 or $430 — which look more credible than a flat $400. When it comes to creative work I really see no logic in an “anal” number like $438.67…
    When it comes to printing (I mark up my printer’s price between 20% and 35%, depending on the scope of the job) I can be more “accurate,” using numbers like $127… and especially when I add the shipping charges (which I also, slightly mark up), a number like $15.65 looks more credible than a flat $15 or $16.

  12. Thanks for another wonderful post. The place else may just anybody get that kind
    of information in such an ideal way of writing? I have a presentation subsequent week, and I’m on the search for such information.

  13. Awesome advice, I may try to use them in near future. Thanks to all of them and to you April Greer.

    Regards,
    Prerak Trivedi.

  14. Pricing is not a part of my marketing strategy. Instead I use a simple equation like this:

    Appeal of the job vs. Clients ability to pay vs. Potential profit for the client.

    This results in jobs going from pro bono to 800$/hr., and me always being satisfied with the payout. The exact figure will be nice and round for an easy overview in my books.

    Next, I always charge twice the minimum amount, I’d let myself go for. This allows me to ‘break the budget’, and then give my client a substantial discount (up to 50%) on anything out of budget. This instant sign of goodwill tells my client that I’m committed to their projects, and that although I made a miscalculation, I want to follow through, no matter the cost.

  15. Do you provide to all of your clients the same or identical design service? Put yourself in your customer’s position. If you had to choose between Preston, Michael and Becky, who would you choose? Each of us would chose another way, so we should go to each customer how we think he will be pleased.

  16. Pricing is one of the most difficult aspects of design practice. As an example, I used to design book covers and books for a major American university press in New York. I usually got about $500 for each cover which did not come near compensating me for my time. However, I loved the challenge and the prestige. Then I came across a publication which purported to have authoritative pay schedules for any and all projects including all forms of editorial design. Their suggestion included costs for rough ideas, intermediate proofs, and final production as well as extras for illustration and/or photography. As I recall their final price came to about $4,500 per cover. I mentioned this to my production manager at the press and his terse comment was, “It’s been nice to know you.”

    In over fifty years of design practice, forty-four of them as a freelance, I have only gotten it right a few times. Even now I am engaged in three projects, one of which I got wrong, and two of them that may return a profit. My attitude is not to nickle-and-dime the client, to be honest, and to charge what the traffic will bear.

    You win some and you lose some, but the main endeavor should be creative excellence not money. The idea that $500 should be $499.95 is ludicrous to me. That’s like running a grocery store. I establish a relationship of trust, give a decent estimate and, when things get out of hand, renegotiate the deal. It’s never failed me, and I have been involved in deals worth $750,000.00.

  17. This is really good advice. I’ve been using numbers that look odd for a while and I can vouch that it works.

  18. Interesting, but I can say I’ve noticed a difference with either type of quoting (with or without pricing gimmicks). I find it more important to point out the value they will receive by getting great design with personal attention, and by avoiding a lot of overhead costs associated with a larger agency.

    That being said, I’ve had an hourly client “test the waters” early on by asking about the time spent on an item. I assured him that I usually round down my time to a 30 minute increment. So, I now add “underbilled” on some items, and a line item for $0 or “no charge” at the end of every invoice, for consultation and incidental file requests, (all invoices now actually). This has eliminated any billing questions and provided warm fuzzy feelings all around.

    One of the most helpful things I’ve learned of the past few years (when donating a fair amount of design work) is to quote or bill everyone using the same criteria…that means family, friends, charity…whatever. Clearly list what each phase of the project costs, then show any discounts at the end of an invoice. That way, when your great work gets some word-of-mouth love, it won’t be accompanied with faulty expectations of what things really cost.

    • Tim,

      Your last paragraph is golden – whenever you discount work, always provide the true cost and then show them the discount they’re getting so when they share your name with others, they don’t share a price that’s specialized for them.

      Thanks for sharing!

  19. “CAN’T say I’ve noticed a difference”. Sorry about that.

  20. Interesting advice, I tend to use whole numbers but always detailed my quote with how that was made up and never got questioned or quizzed on anything, but maybe I can save some time on so much detail coming up with a more exact price, will give it a try!

  21. I use whole numbers. You can break down a quote from me like this: General Design Rate ($80) + printing cost ($200) + markup on printing ($60) + Goods & Services Tax (being Australian = $34)

    So when I quote my client I send it them as single final figure (in this case it would read as $374.00 inc GST) but I don’t break it down for them unless they request it from me.

    I generally DON’T charge for consultations – I factor travel costs and additional time with the client into the markup on printing. If I know that going over alterations with the client is going to take more time than actually doing the work (and I’ve been in the game long enough to spot a fussy client.. usually) then I’ll increase the markup anywhere up to 50%.

  22. I dont give a whole number like 1000/- or 500/- since the customers will immediately feel i have not calculated and i am overcharging them.. instead i go on the lower side like 960/- or 465/- . This covers both points 1. they feel they are paying less and also they feel i have calculated the detailed cost.. Till now its worked fine with me..

  23. My name is Charles Ott and I am an illustrator from Pittsburgh & the creator of Steel City Artist Illustrations & Digital Art. I specialize in detailed hand-drawn pen & ink illustrations & digital art which is sold as fine art prints. Pricing has always been one of the most challenging aspects of my small business. So I decided to experiment with using both .95 and .97 cents on my smaller pen & ink prints and using whole numbers, most often ending in the number five for my digital art canvasses and prints. I try to keep my fine art priced below my competition slightly given the present economic situation. The bottom line though is that if someone wants it they will usually pay for it regardless if it is a difference of three or five cents.

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