How "PRICING" can be a tool for "MARKETING"?
“How much profit my small design firm shall expect initially?”
“How much fee should I charge without losing the client in a cut-throat competition?”
“Which pricing structure is right for my firm?”
These are some of the common dilemmas of the start-up design firms. As design continuously evolves during the project lifecycle, it heavily impacts the overall project cost and timeline. This is one of the reasons why most clients are also unsure of how much a designer is going to cost them at the end. Therefore, clients like to make a safe choice by selecting more experienced designers in comparison to the new start-up companies. This may sound like a bad news for young firms, but I take this as an opportunity.
Young companies are more flexible and have a chance to offer more innovative work-packages and pricing structures that can indeed benefit the client. And it is up to your marketing campaign to take this message heard. Pricing structures are subjective and there is no right or wrong method to choose from. Aside from the pricing models that are employed locally in your region, your firm may benefit from introducing some of the following models that I consider beneficial to small design firms:
‘If you have a hammer, every problem is a nail.” – Abraham Maslow
Having a larger toolkit is a way to see every problem with a new solution. Every project is unique and so its need for your services. Create innovative combinations of the services that you offer and package them together to customise it for your client. This will not only make you more competitive, but will also be attractive to a larger market base. Particularly in difficult economic conditions, breaking down your services into components and customizing the needs of a project, is an effective way to win over other competitors.
2. Fee as per the degree of ‘difficulty’:
Most designers like to charge their fee as a fixed percentage of a project costs. But is designing a residential building different from designing a hospital building? Does it take equal efforts? Sure, it does not. Projects differ in their scope and required design inputs. Different countries have different practices regarding how an architect can charge their fees. For example, HOAI (Honorarordnung für Architekten und Ingenieure) is a regulation for architecture and engineering services in Germany. It suggests five different fee bands for the projects with different degree of difficulty. Fee Band I is for projects such as parking garage and temporary structures which have a very low degree of design effort. Fee Band V is for projects such as museums, libraries and other landmark buildings which have a very high degree of design effort. Different Fee Bands are charged with different amount of fees. For Example,If a 100,000€ project is under Fee Band I, as per HOAI, architects can charge fees between 8500€ to 10,200€. But if a 100,000€ project is under Fee Band V, he/she can charge fees between 18,000€ to 19,700€. This is a very effective method to convince your client to justify the design efforts and its value.
This is a good example of how pricing model can be creative and be applied for your own firm.
This model is getting acceptable in recent times with architects working for real estate developers. Architectural firms choose to buy a property equivalent to their project fee in the developer’s project. This is a win-win situation for both parties as the developer doesn’t have to part with cash and architect is sure of receiving the full fee at the end of the project.
4. The art of “Free” services:
When something loses its price, it also loses its value. Thus, giving your services for free is not an ideal situation where you end up doing the hard work without any payments. But don’t you feel excited when you a get a high-tech speaker free with a purchase of your new laptop? Free ‘goodies’ and ‘add-ones have always been a very popular marketing tool for selling products. But can it be applied to architectural or design services? Design some add-on services for your client such as basic 3D renderings, coordination with other consultants, assistance in managing contract documents, etc., which does not take too much effort for your firm but is of a great value to your client. Providing free services for community work, professional associations, charitable groups; is not only a way to earn a good reputation, but also a way to earn new contacts and build your professional network for future potential projects.
The above are just a few examples of some new ways to use ‘Pricing’ a tool to attract more client and lead your firm to more sustainable growth. Your creativity in designing your pricing model can become an effective marketing tool to win new projects and stay ahead of your competitors. With time, these models will also keep changing, but it is important that you always innovate in how you present your pricing structure and stay competitive without crossing your expenses.