In the famous Seinfeld episode about ‘the hand’ Jerry says “We all want the hand. Hand is tough to get. You gotta get the hand right from the opening.”
Collectively designers have lost the hand when talking money with clients. We have commoditised design through selling it by the hour rather than value. We have turned design into a home brand product where price is the be all and end all.
Someone, somewhere, at some time decided that the value of design correlates to the time spent working directly solving a client’s problem. Although clients may agree to a retainer, fixed fee, or equity swap, nearly all of the design firms I surveyed for this story estimate their fees based on some hourly formula.
The problem is, even if you start the clock ticking when you first sit down to research a project; the time thinking about the project under the shower, in the car or on the train is not usually taken into account. Added to that are the years of experience you have in solving complex problems by design. These hours are not recorded but they should form part of what’s charged to the client. They are part of your onlyness.
Is the hourly model really the best way to determine the value of design and branding services?
The value mirror approach
Clients find it easier to match a task up with a number of hours and multiply by an hourly rate. They want a design commodity where they compare design fees across a number of competing agencies; an approach based on outputs rather than outcomes.
The answer is to to prepare an estimate for outcomes from the clients’ viewpoint by estimating the value for a design program in their terms; the value mirror approach.This is where the design ladder comes in to play. Using the ladder you can classify your clients and their current acceptance of design value; turn the mirror on them. This gives you the opportunity to explain your onlyness and how you deliver value.
A new currency
This approach offers a new currency for designers, and clients, with the outcomes valued in the clients’ terms. Increased sales, new clients, more tickets sold etc are all outcomes that can be valued.
Take an accountancy firm who typically charges a small business $8,000 – $12,000 per year. By taking the same approach an accountant would take in pricing their services you can put the following case.
The value of a new brand that gains 20 ongoing clients is going to be 20 clients x five years = $800,000 – $1,200,000 which would typically be $160,000 – $240,000 profit. Doesn’t this make the new brand development worth at least $80,000?
This approach also offers increasingly budget-conscious clients an alternative way to understand design expenditures.
I think we should continue to track time to measure profitability and productivity. This means estimating a project by calculating the number of hours it will take, THEN start looking for an equivalent cost that the client would better understand. This is the basis of our Value-based design pricing masterclass. Here we show how to put all this into practice.
Take away point
By aligning design services with how clients measure their own business success we can show the value of the creative process in a tangible way that they understand and respect.
Got a question? Want to share your point of view? Please feel free to email me.
Want to find out more about selling design value:
Co-founder Design Business Council.
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About Greg Branson
Greg’s passion is the research and development of methods that improve design management and the role of design in business. Greg has developed a series of processes and tools to help designers manage their business better along with a series of workshops that show designers how to use these tools.