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3 Defining Dynamics to Move from Hourly to Value-Based Pricing

Lindsay Halsey

Lindsay Halsey is a co-founder of Pathfinder SEO. She has over 10 years of experience working in SEO with small to large businesses. Lindsay focuses on teaching site owners, freelancers, and agencies how to get found on Google via a guided approach to SEO. Stay in touch on Twitter - @linds_halsey.

When you first start offering SEO services, you’ll likely choose a pricing model that is based on time. Whether it’s a project-based offering like an SEO Assessment or SEO Set-Up or your monthly services, your price will likely be a multiple of the estimated hours of effort by your hourly rate.

Over time, you may decide it’s time to explore moving from hourly to value-based pricing. Having a value-based pricing system is not only about the value that your services deliver. It's about the value that the customer perceives your offerings will bring.

As explore value-based pricing for your agency, here are three defining dynamics to consider.

1. Value isn’t only about the price

When it comes to setting a price for your services know that the price alone isn’t always indicative of the value therein. For example, charging too low a price can be a red flag to a potential client in the same way that charging too high a price can be. Remember, it’s about establishing a level of trust with the client and doing so from the beginning.

That is to say that when moving from hourly to value-based pricing for your agency consider these two influential inquiries:

  1. What is my agency bringing to the table to move the needle?
  2. What is the value customers would perceive in moving that needle?

Value-based pricing plays the biggest role when you're trying to move your agency or business projects upmarket. When you do so, the price placed on your services represents your expertise and the level of completeness of the product/service you provide.

From the client’s perspective, the value lies in these three fundamental elements:

  1. Longevity
  2. Completeness
  3. Trustworthiness

We are inclined to note that it can be difficult to provide value-based pricing to small businesses. In this market, you are more often than not tied to a time and materials pricing model because that’s how the competition prices its services.

2. Articulate the value you bring to the table

Existing in the value-based pricing model can be challenging because it requires a deeper understanding of your prospects' business than an hourly pricing model. Most importantly, you need to understand how and where your offerings can deliver value within the prospect's unique business.

Set yourself up for success by first understanding the potential client’s perspective.

  • Do you understand where your service(s) fit into their workflow?
  • Where do they have extreme costs, concerns, and challenges?
  • Do you know what the potential customer’s annual revenue is?

To best articulate the value you bring to the table, start by discussing where the client will find value in your services. This is important. Do not invent where value could or should go. Focus only on where the client will find the value of your offering.

Once you understand where your services fit into their results, you can begin to tailor your offering.

3. Tailor the value of your services to each customer

Shifting to something more tailored means getting in close to the client and their objectives. This is to say that you need to have a deeper understanding of the customers' internal costs by this point. Get to know what their investment habits have been thus far, too. Knowing this info will help you better price the services included in your value-based price offering.

Get the conversations in this working relationship to the point where they’re comfortable sharing these kinds of details. Once the customer begins to share how much they’ve invested to solve their issues, note this data when formulating your offering.

With the knowledge of their previous spending efforts and internal costs, you can tailor your services to fit the value the client requires. Simply throwing out a price based on your assumption of the customer's ability to pay may end the deal before it has had the chance to begin. But tailoring your offerings' value-based price on the profound value it brings the customer is the sweet spot. And exactly where your agency should be aiming to reach to move the needle from hourly to value-based pricing for all your clientele.

What's Next?

Value-based pricing isn’t for every project or every agency. You can absolutely build a profitable business by pricing your SEO services using an hour/project-based model.

That being said, if you find your prospects moving upmarket, then it’s time to dig deeper into price and explore the value-based model.

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Lindsay Halsey

Lindsay Halsey is a co-founder of Pathfinder SEO. She has over 10 years of experience working in SEO with small to large businesses. Lindsay focuses on teaching site owners, freelancers, and agencies how to get found on Google via a guided approach to SEO. Stay in touch on Twitter - @linds_halsey.
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