Charging what the market will bear; Advice for design students/new designers

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charging design clients

A question every new designer and student inevitably asks is “how much do I charge for my work?”. If you asked a business professor to sum it up for you, it wouldn’t be unusual to be told “charge what the market will bear”.

This is definitely not to say that you should attempt to gouge clients on price. Many in the graphic design industry rely heavily on customer loyalty and repeat business in order to thrive, and nothing puts people off more than being unfairly treated on price. On the flip side, nothing makes a client happier than being quoted less than they had budgeted for (as I’ve done on several occasions).

It is however an important philosophy to understand when developing your price strategy.

A classic example of charging what the market will bear (and this is more on the opportunistic/price gouging side of things which I’m definitely not advocating…) is when it rains. On a sunny day a retailer may sell an umbrella for $30, while on a rainy day they may sell the same umbrella for $50. Whether or not this is a good or bad decision depends on the type of business.

If you’re running a street stall (business type A) where business depends entirely on random passers-by with whom you have no existing relationship, who have no loyalty to your business, have no prior previous reference of pricing, and who won’t likely be repeat business, you stand to make a tidy little profit with little to no negative long term consequences.

If, on the other hand, you’re running an established retail store (business type B) where customers often will have shopped with you before, have previous reference of your pricing and are the people mostly likely to make a future purchase with you as they have developed some loyalty towards you, by increasing your prices to take advantage of a rainy day you will make a quick buck, but you’ll likely burn a bridge in the process. This is a short term gain in exchange for a long term loss.

Graphic design is a type B business. For me, around 30%-40% of my income is derived from repeat business. I’ve heard from others who claim to receive around 80% of their income from repeat business. That’s a significant amount of business you’re likely to lose if you’re seen to be hiking up prices at every opportunity. It’s also not going to be good for word of mouth business.

In the type B industry that is graphic design, charging what the market will bear means setting a fair price which reflects your abilities and the quality of your work, while remaining inside your desired clients budget. While this sounds pretty straightforward, it’s often an area where things start to come apart for students and new designers. A few common situations and thought processes which lead to this are:

“I’m new to the field/I’ve only just started my business” – Obviously if you’re fresh out of the gate, there isn’t going to be any buzz around you, and you won’t yet have any reputation to trade on. This isn’t to say though that your work is automatically worth less. Assuming the quality of your work is equivalent to that of an established, sought after designer, there’s no reason you shouldn’t/can’t charge equivalent rates. Quality speaks for itself, and there are plenty of people who prioritise quality over price.

Starting out doing cheap jobs with the hope of building to big ones. – To borrow a quote from a LinkedIn discussion I took part in some time ago, “you really benefit from providing a cheap service that boasts great results.” This is something I disagree with.

As an example, if you’ve decided that your hourly rate is $50 but as a starter you do a 20 hour website project at half price – $500. At the end of the day the client has their website, and you only have half your fee. Ok, so you didn’t make what you wanted, but there is the potential for more business, right? Well, no.

People these days often have stakes in multiple businesses, and should the client you did a job for at half price come back to you in the future looking for another website, as you’ve already set the precedent of $500 there is simply no way to justify to them doubling your price for the same product. If you had a meal at a restaurant for $100 on Monday, would you pay $200 for the same meal on Tuesday? Of course not.

The same problem occurs if a client has been referred to you by word of mouth. They will not pay $1,000 for something they know their colleague just received for $500.

Your work is worth what it’s worth. Discounting purely for the sake of discounting is of no benefit.

Typical reasoning from new designers with somefirst hand experience and knowledge of their usual clientele is usually something along the lines of “If I quote $1,000 for design X they will probably go somewhere else” and that “I’d rather have cheap work than none at all”.

Both are valid points, but charging $500 because that’s what your market will bear is different to charging $500 because you’re new to the field. I know it might sound like I’m nitpicking here, but there is an important distinction between the two.

The difference is in the mindset. Over the years you will have to increase your prices, as all businesses do. If you’re charging lower than your ideal price but you’re conscience of what people will and won’t pay, you’ll know when to increase your prices. If you’re charging lower than your ideal price because you’re new, inexperience or think you’re otherwise undeserving of a higher rate, you’ll never get out of the habit of undercharging.

I’m a big believer in the old adage “An honest days work for an honest days pay.” Charging what the market will bear isn’t about squeezing a few extra out of a client. It’s about earning the best, fair rate for all that hard work you do. Image credit.


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5 thoughtful comments on “Charging what the market will bear; Advice for design students/new designers”

  1. Emma Thomas-McGinnis says:

    Easier said than done… meaning this is great advice, but difficult to determine without a great deal of research and trial and error.

  2. Kenton Smith says:

    I liked this post Andrew. You make some really good points I hope people read it. The work gets done so much easier when you feel like you’re being paid a fair price for it.

  3. Andrew Keir says:

    Emma,

    Perhaps. As Kenton mentioned though, hopefully the people without the experience read this and it puts them on the path of trial and error, rather than short changing themselves forever.

    Kenton,

    Thanks, I hope people read it too.

    I absolutely agree with your comment “The work gets done so much easier when you feel like you’re being paid a fair price for it”. When I was starting out I made the usual mistake of under-quoting on a few projects, and found myself stuck between rushing to complete it within a sensible amount of time and working longer than I should in order to get a quality result. You definitely have to charge a reasonable amount for your own piece of mind and for maintaining the quality of your work.

  4. Alec Rutgers says:

    Sometimes I suppose that might include what designers outside ur country charge for a particular job.

  5. Andrew Keir says:

    That’s a factor these days, but not something that should discourage people. I charge the same rate for local and international clients and have regulars in Australia, the UK, USA and other places, and they don’t have any issues with my rates.


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