Making a go of it as a freelance web professional is not for the faint-hearted. In addition to delivering on the client’s expectations, you’re also going to be faced with an alarming list of other areas you need to master just to keep the show on the road. Pricing strategy is at the very top of that list.
Pricing strategy is a classic area where freelancers struggle, especially when they’re starting out.
It’s a slippery subject that often raises uncomfortable emotions for otherwise nerveless professionals. It’s also an area where you can really do deep damage to your long-term success prospects if you don’t get it right.
Here, we’ll break down four of the classic pricing mistakes freelancers typically make to help you steer clear of danger. Avoid them all and you’ll be well on your way to a perfect pricing strategy!
1. Not knowing your monthly expenses
A worrying number of freelancers approach a pricing strategy by picking a vaguely aspirational gross revenue figure they’d like to be making per year, and working backwards from there. This, to put it mildly, is a recipe for ruin.
You’ll then need to add on whatever the lowest value you’re prepared to pay yourself is. It’s at this point you work out the gross figure you need to hit those numbers, after tax deductions of course.
Generating these numbers can be a sobering experience for many freelancers. Bear in mind that these are the absolute minimum numbers your pricing needs to support. You’ll also want to work in a reasonable cushion to allow for fallow periods, and time devoted to admin and client acquisition. Finally, you may want to bump things up across the board to shoot for a more reasonable final take-home amount for yourself.
The amount of otherwise highly competent and professional people who never carry out this exercise is astonishing. Don’t end up in that unhappy group.
2. Failing to research the competition
Getting precise details of project pricing from competitors is admittedly not always a straightforward affair. However, it is something you absolutely have to suck up and do.
Without a clear picture of what your immediate competitors charge, you risk radically selling yourself short without even realizing it.
Before you commit to a particular pricing strategy yourself, make sure you’ve identified at least three competitors in your area broken out across cut-price offerings, direct competition, and top-tier providers. Do a deep dive on the pricing and services options of all three in order to get a true feel for what the market is currently supporting. This will enable you to establish at least the rough borders of the pricing landscape you’re potentially operating in.
3. Competing exclusively on price
Once you’ve got a general idea of where the lines are in terms of the market at large, resist the temptation to drum up business by competing exclusively on price. It’s a tempting pricing strategy to go for when you’re just starting out (or if times are tough) but you’re shooting yourself in the foot long-term if you do it.
Go down this road and you’ll be dragged into a race to the bottom that will make any type of sustainable success virtually impossible. You’ll also attract a far from desirable class of client.
The way out of this is by adding extensive customer research to the competitive research we’ve already suggested.
Once you truly understand both your potential customers and the wider market, you’re in a great position to compete on actual value delivered. This naturally opens the door to substantially more lucrative pricing, as you’re able to show a clear connection between your work and increased profits for your clients.
4. Not offering enough pricing options
We’ll keep our last point brief. Even if you’re not expecting a huge amount of people to take you up on them, it’s nearly always worth including at least a couple of big ticket items or pricey additional services across your range of offerings. You’re killing two birds with one stone here:
- There will always be a small group of clients who actually want to pay more. Make sure you’re giving them the opportunity to do so.
- Having a range of pricing points also helps anchor your core offerings by making them look comparatively affordable.
This is a simple and entirely ethical trick to pull off, and one that can deliver outsized results down the line. Make sure you’re not missing the boat by only offering a single, one-price-fits-all flat rate.
Pricing strategy: One size does not fit all
As a web professional, pricing is one of the biggest levers you can pull in order to lock in a lucrative and sustainable future. The amount of otherwise excellent providers out there that severely hamstring themselves in this regard is sadly quite large. Make sure you’re not on that list by steering clear of the four classic pricing strategy mistakes we identified:
- Not understanding your true costs.
- Not carrying out extensive competitive and market research.
- Competing solely on price.
- Not offering a range of pricing options.
Of course, there are many other factors to take on board when it comes to pricing (including the perils of underpricing). However, start by steering clear of the traps we’ve outlined, and you’ll be a long way ahead of the competition.
Are there particular pricing strategy mistakes you’ve fallen foul of? Get in touch via the comments section below and share your experiences!