Finding and combining different pricing models
In today's episode, Mattias talks about the different pricing models and how some might be suitable for bigger projects and others for smaller tasks.
Finding a suitable pricing model
Running a service-based company in 2022, Mattias can really see the struggles when trying to find the best way to base pricing for customer projects. Value-based pricing is great in many situations; however, sometimes, communicating hours might be the better option.
Especially when it comes to bigger projects, there's a huge risk when working with fixed, value-based pricing. Mattias explains this by using the example of "Slussen," a big travel hub in Stockholm's center. The whole hub needs to be relocated, making it a massive project. The decision for this undertaking was probably made more than 20 years ago. If the first quote for realizing the relocation would have been a fixed price back then, the whole thing would most likely not have happened.
Combining fixed and hourly pricing
On the other hand, small things like writing a blog post or implementing minor marketing tactics are things that would work out well with a fixed price in most cases.
Mattias and his team are still trying to find the best way to combine fixed and hourly pricing into their projects. One thing they've just implemented in that process is starting to estimate not hours but full days. The support services are still estimated at an hourly rate, but the consulting will be calculated based on days from now on. In addition, they also implemented a "minimum debit" for projects and consultant execution.
Developing unique approaches
Mattias explains that companies have very different approaches when it comes to the way they're pricing, and some companies even develop their own "currency." Instead of communicating fixed prices or hours at a specific price, they talk about tokens, points, or alike. The idea is to take the actual money out of the way and reduce the friction in the sales process.
Even though he understands its thought, Mattias isn't the biggest fan of this system yet. He doesn't believe that people would magically forget about the money by exchanging money with points or tokens. They will still convert these metrics in their head, which might even lead to more friction in the end.
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There are many advantages of value-based pricing however when it comes to bigger projects hourly prices are most likely the better option.
Do you you a specific pricing model or do you combine different ones?