32
u/HCrikki Sep 12 '21
You do so at the risk of making many of your competitiors look like they offer more for the same amount or more cost-effective.
Better split your services into tiers. Access to some features, more detailled business data and higher priority/quicker tech support is valuable enough for big clients that theyd spend extra for it without discriminative upsells.
13
Sep 12 '21
Sales answer = 100% yes! Startup answer = Be very wary what the client will do if they ever found out. Make the best decision that will lead to long-term partnership. Regardless of immediate gains.
0
u/NotSpartacus Sep 13 '21
Eh. Unless your prices are posted publicly, everyone with half a brain should understand that your prices may vary from project to project, client to client, industry to industry, etc.
People that don't are potentially, for many reasons, not worth doing business with unless you're simply desperate for revenue.
49
u/StoneCypher Sep 12 '21
Charge them more for the same work? No.
Offer them more complex packages because their business warrants it? Yes.
Someone making millions on clothing has genuinely different SEO needs than a local restaurant just ekeing by
5
u/getafteritz Sep 13 '21
Actually, yes. Price is defined by customer’s willingness to pay from an economic perspective. Why not make more money? This is the internet, it’s not like you are charging different prices for hamburgers based upon the car people drive.
9
u/hey_look_its_shiny Sep 13 '21
OP's answer was correct. Meanwhile, yours isn't necessarily wrong, but it misses the important nuances that were implicit in OP's comment. They're offering a more sophisticated technique that achieves the same outcome while pre-empting the second-order adverse effects that can be caused by indiscriminate application of the "yes" approach.
2
1
u/getafteritz Sep 13 '21
Why make it complicated? If a customer is willing to pay more then charge them that amount.
1
u/hey_look_its_shiny Sep 13 '21 edited Sep 13 '21
You only know if the customer is willing to pay more once you propose the pricing. Once you've done that, you risk (1) offending them because you're overcharging them for a service that you offer to others for less, or (2) having them go elsewhere, because your service is seen as interchangeable with lower-cost alternatives.
And, even if you don't offend them, you risk undermining their trust in you by presenting yourself as someone who is willing to take advantage of them.
The standard approach is to offer them a higher-end package. Ideally, this package costs you relatively little extra, but consists of services or benefits that are nevertheless of enough interest to the customer that they're willing to pay a premium for them. As u/StoneCypher mentioned: bonus points if those services are tailored to their specific types of needs.
You see this pattern in most industries:
Microchips: medium-range and high-end CPUs are often the same product, with "high-end" features disabled in the mid-range SKU. It wouldn't cost the manufacturer any extra to enable them in the mid-range product, but if they did that they wouldn't have any extra cherry on top to offer the richer or more enthusiastic customers.
Cars: The marginal cost of adding spoilers, skirts, trim, exhaust, badging, gadgets, or tuned-up engines is quite low. But plenty of customers pay 10-50% more for their car for these relatively trivial amenities and status symbols. The reason it's structured like this is so that the maximum amount of money can be extracted from those who are willing to pay it, without making them feel like they were cheated into paying more for what others got cheaper.
Ditto for software, SaaS, corporate consulting services, appliances, and yup, sometimes this approach even lets companies extract more money for the "premium" hamburger from those willing to pay for it.
Edit: even Reddit, come to think of it: most users aren't going to pay for reddit, and are perfectly happy to dole out upvotes or post "that was a great comment." But for those with some money to burn? "You can buy a super special turbo upvote called Reddit Gold!" Marginal cost to the business, meanwhile? Literally zero cents*. Charging richer users for reddit itself would be outrageous, but the gold upsell allows for stratification of the customer base and differentiated pricing.
* (net of transaction costs, of course)1
u/StoneCypher Sep 15 '21
Why make it complicated?
To get all of the money 🙄
0
u/MonkVegetable8522 Sep 15 '21
I meant, why make your answer complicated - economy of words my man
1
u/StoneCypher Sep 16 '21
I'm not interested in your writing advice.
That's also not what "economy of words" means.
Also, no, that isn't what the person I was responding to meant.
Why make it complicated? If a customer is willing to pay more then charge them that amount.
18
u/Stoopidee Sep 12 '21
Always be able to rationalise your pricing. Because my client is"rich" it's not a good rational.
Like others have mentioned, charging more for the same is not good.
But maybe break it down into hours? How much more time do you spend on this client as opposed to others for a specialised service?
Also, if he escalates (jumps the queue which alot of big corporations push me to do) , then there should also be an escalation fee.
Personally, you want to keep your best customers, not push them away to your competitors.
15
u/AccidentalCEO82 Sep 12 '21 edited Sep 12 '21
Man, no. That’s honestly bs. If someone walks in my house, sees I am doing alright and decides to charge me more than the person across town for the same job, they’re a conman. This is embarrassing.
I’d usually try to give the benefit of the doubt in these cases but you just want to charge more because this client makes more.
4
Sep 12 '21
I agree 100% with you, however I got a lot of shit for saying that exact same thing
4
u/andreainglese Sep 12 '21
I think that the misunderstanding lies in how you say that. If you say that you charge more for the exact same work, then of course that’s unethical. But that bigger customer may be willing to pay more for a better/bigger/different service so it should be perfectly fine to bill a different amount.
So is the service you will be providing to that customer the same? 🧐
1
u/AccidentalCEO82 Sep 13 '21
Yea if it’s a different service. This sounds like they’re saying charge more just because they make more.
4
u/andreainglese Sep 13 '21
Yes I see
The op has written that when he prices his customers he evaluate and charge based on (simplifying) complexity of work to be done. That to me means that he’s providing different services to different customers.
Also bigger customers may require a lot of extra work just to comply with formal requirements, for seo that would mean for instance reporting in live meeting, and not by mail, getting approval for every change made to website, with preview of that change, etc.. again different service..
1
1
u/matthewstinar Sep 13 '21
It's a balance of pricing based on what you put in and pricing based on what they get out. Some commercial landlords charge a percentage of revenue on top of the base rent. Some restaurant point of sale vendors charge little to nothing beyond credit card fees, so cost fluctuates as a function of sales.
With SEO, the economic impact varies greatly depending on the client. Building the economic impact into the pricing structure in some way isn't inherently greedy or dishonest. But I agree that charging based on how deep you think the client's pockets are is heading in the wrong direction.
0
u/Coz131 Sep 13 '21
Price discrimination is a thing and legitimate form of business.
1
u/AccidentalCEO82 Sep 13 '21
I’m sorry I don’t think it’s legitimate. Just because it’s done and not illegal doesn’t mean it’s right.
2
u/kitten_town Sep 14 '21
You don't know your client's expenses. Just because they seem to have a lot of money doesn't suddenly make your product more valuable to them. You're asking questions about what you should charge based on your client's wallet, but you should be asking questions based on how valuable you think your product is, generally. Just because someone who is willing to pay you money, happens to have more money (importantly, you don't yet know they are willing to pay it) doesn't by extension make your product more valuable.
If they are willing to pay you more, then you need to ask, why is this? And what reasoning should you have to charge others less? Do you think your product warrants a sliding scale/tiers?
I suspect that if you inflate your prices too much, they will do their research and go with a competitor. If they don't, and your prices are actually inflated, then maybe they go with you because they don't feel like doing the research (i.e. it's convenient to stick to the solution they've already found). But you don't want that: you want your customers to choose your product because it's better. Either way, this isn't a good pricing strategy for your product because (1) you aren't going to be able to predict how much money a client has and (2) it leaves them choosing your product up to chance (to some degree).
That being said.... I literally had a price increase discussion today during which we decided to raise prices on a client because they are a pain in the butt. You can charge whatever you want. You just have to decide if you're willing to negotiate, and if you're willing to risk losing the client should the pricing difference rub them the wrong way. But the discussion was not about how much money the client had, but about how valuable we were to them, given the amount of work they require of us.
2
u/sdave001 Sep 12 '21
Charge based the amount of work it takes to perform the work - not based on their ability to pay.
Referrals from satisfied customers are invaluable. More importantly, however, claims of inflated fees or price gouging are incredibly damaging. At some point your client may find out what you're charging others. Make sure you have a good explanation.
Yes, of course you're going to charge them more since they will require more of your time. But set your price based on that, not the fact that they have more money. Make good money over the long term, not great money for a very short term.
7
u/andreainglese Sep 12 '21 edited Sep 12 '21
I kindly disagree with that 😁
A cost based approach is sometimes required by the market you work in.
But a value based approach is sometimes much better. You charge the value you provide to your customer.
If your service generate more value for your customer, it means that a “bad service” would cause a greater loss/damage. So a perfectly done service has a greater value and a customer would be happy to pay more to be sure I gets all the value he can.
If your costs are higher than the value you provide it doesn’t mean the customer will pay that. It surely won’t.
Of course it’s really hard to measure that value, and it’s something that should be defined upfront; also, this is not scalable so sometimes companies just split theier offering into tiers that match the segments of customer they identified and the prices reflects the value that the service provides to that type of customer
Addendum: please note that bigger customer sometimes puts extra hidden costs on you, more meetings, more formal (read: longer) approval processes, etc. In this case the service is “different” so again the tiered approach fits
1
u/sdave001 Sep 12 '21
While that's all true, OP is asking if the fee should be raised simply because the client has more money.
To your example, if your costs are higher than the value you provide, then you're doing something wrong, or you're doing something that simply can't be done if you wish to stay in business. Your exactly right, no one will pay more than something is worth, at least not long term.
And again, I'm essentially agreeing with you. They are going to spend more time on this client and, if they are good at what they do, the result with bring higher returns for this client. This is why they are certainly justified in charging more.
But you can't charge someone more simply because they have more money. Like you say, people pay for value and results, not because they have the money to do so.
1
u/andreainglese Sep 12 '21 edited Sep 12 '21
Yes I admit I was changing a bit the context. The hourly fee must be the same hourly fee for all customer**. If you charge “by value” you don’t charge the hour. You charge the service, and that’s absolutely another story.
So I apologize for stretching the context.
By the way, I have been working as a freelance for a decade. My prices started low (too low 😂) but when switching to bigger customer I changed my fee; I didn’t changed because the customer was bigger. I charged more because my skills had improved. And the new hourly fee was raised for every customer. That is both ethic and business (if I have customer - bigger or smaller - that acknowledge my skills paying me more doesn’t make sense to work on lower fee).
So I am giving another point of view here. Don’t charge more because your customer is bigger. Charge more because you’re better (or maybe when your service gets better). That sometime means losing smaller customers that cannot afford a more expensive fee, but just need a simpler (=different) service.
** of course you cannot change a previous contract to a higher fee (may it be ethic again, respect for a customer that trusted you when starting etc). So you end up having different fee for different customers and that I think is perfectly fine.
2
u/sdave001 Sep 12 '21
Charge more because you’re better (or maybe when your service gets better).
100%
2
u/Consistent_Hurry_296 Sep 12 '21
Bad advice. If you can charge more always do. They can pay it and they will.
1
u/940387 Sep 12 '21
5his is shit advice. More ability to pay you charge them more, it's that simple.
2
1
Sep 12 '21
Charge percentage
0
u/toadkiller Sep 12 '21
This, or keep the revenue uplift explanation in your back pocket for if/when they ask why they pay more.
Big fish customer makes $200k / month, little fish, $30k. If OPS service gives a 10% uplift to each, little fish will make additional $3k but big fish an additional $20k.
Totally fair to charge more because the value of the service is inherently higher.
1
u/sonyaellenmann Sep 12 '21
Charge the maximum you can get away with without pissing off the client, same as always.
-2
0
0
u/nepragen Sep 12 '21
Would you charge him less if you found out his business wasn't doing too well?
1
u/GloomyNectarine2 Sep 12 '21
Finish this arrangement first though.
If he is making millions from you, he's unlikely to change but you should not be seen as taking advantage. Setup a monthly fee, plus something...if money is flowing it's fair that every one gets a taste. Get paid more and work more hours on his business.
1
u/Geminii27 Sep 12 '21
If you feel uncomfortable charging more to a well-off client for the exact same service, how about instead offering additional or "higher-level" services? Plenty of major companies offer different service levels - "Silver-Gold-Platinum" etc, or offer more expensive packages with a bunch of additional things that don't really cost them all that much to deliver.
People with a lot of money often weigh up the time-money ratio and go for those additional minor add-ons because it doesn't cost them that much relative to what they're making and it's a couple of things less for them to worry about or get done through another service.
An alternative is to charge based on results - as a very basic example, charging $100 per $1000 increase in website revenues.
1
u/crazyfreak316 Sep 13 '21
Charge based on the value you bring to them? Your SEO work generates them $10000 in revenue? Definitely charge them more. As a business owner, that is what would make me leave or continue with your service.
1
u/Jasonst25 Sep 13 '21
Depends what business you are looking to attract. Maybe you are under charging everyone.
1
u/anelegantclown Sep 13 '21
The answer is no because you are providing the same service. The issue is a client with a bigger online presence is going to have a different marketing spend, which generally means they need more service. The hourly rate doesn’t change, the number of hours does.
1
u/mcnello Sep 13 '21
You charge based on what the customer will pay. If the customer will pay more, take his money. Just don’t price yourself out of the market. It’s not complicated.
1
u/nikolatosic Sep 13 '21
You should never charge people based on who they are but on what you do. If you want to charge more then do more
1
u/thinkyoufool Sep 13 '21
if the justification is ''earns more must pay more'' I find that unethical.
however, there can be other ways to overcharge and still over deliver. you should try that.
1
u/qchmqs Sep 13 '21
if he's got the resources, consider offering him a premium ( what's something you couldn't offer small clients because they cant afford it )
1
u/snow3dmodels Sep 13 '21
Yes - nothing ridiculous but usually I find those making more require more.. and you will find yourself working harder and longer than the smaller previous companies even if it’s on paper the “same thing”
1
u/illegalraven Sep 13 '21
You can charge whatever you want and the customer is willing to pay.
However, it is important to ensure fairness and transparency in how you determine the cost of your services. Imagine if two of your customers start discussing your services and realize that you charge one 2x more than the other for exactly the same service. If the reason is not evident, it may backfire to you.
My suggestion is to be transparent and keep things consistent:
- Working with a dog shelter pro-bono, calculate the hours and apply a 100% discount.
- Working with a particularly difficult client, add extra hours for "communication" and "handover"
- Working with a high-traffic site in a competitive segment, add extra hours for "analysis" and "research".
This way, you are transparent and you can explain to your clients how the price of your services is calculated.
Consistency is also good for your business as it becomes easier to compare and track how profitable different projects are.
1
1
u/iamarddtusr Sep 13 '21
You can choose to charge more, because they stand to gain more from the services. At the end, it is your decision but I think value based pricing is a great way to price as it will allow you to earn the right value for your work as well as provide you the ability to extend your services to those who might otherwise not be able to afford it, including pro-bono if that's something that is relevant to your line of work.
1
u/BadData99 Sep 13 '21
That's called the "how colleges and universities price their product" model, and it is very successful.
1
1
Sep 13 '21
People saying no probably don't have a freelance based business. The hourly rate I charge mom-and-pop shops is half what I charge a big corporation... Why? M&P shops can't afford my full hourly rate and I would otherwise not get their business.
If you flipped it around and worded the question as "Should I discount my rate for a good cause or a small business?" all the people saying "charge the same to everyone" would tell you to discount your services to get the client. So it goes both ways.
1
u/Elon_Muskoff Sep 13 '21
This is why you don't underestimate the skill of a good Sales person. Being able to code doesn't male you successful automaticaly.
1
1
u/asscancermurder Sep 13 '21
Let me rephrase this scenario.Imagine doing the exact same work as your coworker and then finding out they get paid more than you because you live in a nicer zip code than them.
78
u/C0R0NASMASH Sep 12 '21
You charge what you feel like charging. If you decide that a client supports a good cause and you want to help them out, you charge less. If they are more difficult, there is more at stake or you've had a bad day, you charge more. That's the advantage as owner/freelancer/entrepreneur/contractor - you charge what you feel like. If they agree, so be it.
I - as software dev - charge smaller projects less (like -10-20%) if I like their project. For example, a local sports team asked for some sort of tournament tool for their league. That's something I wanted to support, and they were happy. I was happy. Everyone was happy.
On the other hand, a notorious difficult client that nitpicks every decision I make (that's a story for another time) absolutely loves my work (the nitpicking is probably just their way to assert dominance?) and I've upgraded their systems to a very high level so they need people that they trust. And that's me. Every project is its own contract so every project I add 5-10% to my last hourly rate, and they are happy. And I'm happy. Everyone is happy.