April 08, 2023
Rethink your earnings: A case study on value-based pricing
Hourly billing is a trap. It's a cage that keeps you tethered to the ticking clock, limiting your income to the number of hours you work.
But what if there's a way out? What if there's a path to greater earnings and a more significant impact?
Enter value-based pricing. It's the practice of charging clients based on the tangible value you deliver, not the hours you clock.
I know, I know. You've heard of it before. But this time, I'm not just telling you about it — I'm going to show you how it's done.
Let's dive into the transformative world of value-based pricing with specific examples from a real-life scenario.
The power of value-based pricing
Meet Sarah, a UX freelancer who's no stranger to hourly billing. But in this case study, Sarah's about to discover firsthand the game-changing benefits of value-based pricing.
Hourly Pricing: The Old Way
It's a typical week, and Sarah's working her magic, optimizing a client's user experience. Forty hours of great work charged at $150 per hour.
Total invoice? A cool $6,000. Not too shabby, right?
But hold on. Sarah's got an idea...
Value-Based Pricing: The Modern Way
She wondered, "What if I've been looking at value all wrong? What if there's a different way?"
She fires up her browser and takes another look at her client's website and does some quick Googling for their yearly earnings — and the numbers are loud and clear.
She finds that her UX expertise could boost conversions on her client's site by at least 5%, generating a whopping $200,000 in additional annual revenue for them.
So, what does she decide to do with this new found information? She stands strong knowing her value proposition, and proposes a fee equal to 15% of the annual revenue increase.
And what does that do to her invoice? Let's do the math:
- Annual Revenue Increase: $200,000
- 15% of Increase: $30,000
Boom — an instant 5X leap in earnings and an effective hourly rate of $750. That ain't too shabby, either!
Four key steps to mastering value-based pricing
Want to follow Sarah's lead? Here's the blueprint:
1. Define your value proposition
Your expertise is gold. Identify how it increases revenue, reduces costs, or boosts efficiency.
2. Calculate your financial impact
Translate value into dollars. Sarah's UX optimization led to a 5% conversion boost, bringing in an extra $200,000 for her client.
3. Set a fair pricing percentage
Sarah charged 15% of the revenue increase. Find your sweet spot and you'll create a win-win relationship.
4. Deliver on your promise
Results matter. Fulfill your value proposition and exceed expectations. Remember: this process only works if you put the "value" in value-based pricing.
It's time to unlock your earning potential with value-based pricing
Value-based pricing is a mindset shift, a venture beyond the traditional, with substantial rewards.
This is your moment. It's time to break free from the cage.
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