By Crystal Collinson
Everyone seems to be talking about costs, the gas we put in our car, the food we eat, and the products and service we buy. In this post-pandemic world, the state of our current economy and the current world events we are all taking notice of prices. Is it just about supply and demand, or do we need to take a broader view, and look at the value of these goods and services?
Value is the perceived benefit that will be received from the product or service. The question is, is value synonymous with price? Why is a Louis Vuitton leather bag 10 times more expensive than a similar quality leather bag? What makes it more valuable? Quality is not the issue of the bag, both will last a very long time, both carry things, so why would someone be willing to spend 10 times more? It is about how the bag will make them feel, there is a perceived value to what the customer will get from owning this bag.
Pricing for services is thought to be difficult to calculate and often seem arbitrary. When pricing design services, we need to look at what the customer/client will receive from these services.
How will the service solve the buyer's problem? If we can clearly identify the problems, and how the provided service can solve these problems, then the Client will pay for the service as they see the value. Value is determined by what your customers believe your service is worth, it is that simple.
In the interior design industry, design fees are typically determined by the amount of time the tasks will take to complete. Personally, I have never been a fan of this type of pricing model. As experience and knowledge need to be considered and are extremely hard to quantify.
An experienced Interior Design professional will be able to strategize your objectives and mitigate problems quicker than someone with less experience. So, should this service cost less, because it can be completed in less time? Of course not, so then the design professional will charge a higher hourly rate to make up for their expertise and proficiency. Trading dollars for time, is an antiquated method that does not focus on the outcome.
Design professionals need to focus on what their knowledge and experience will bring to the project, which is what the client is looking for, not the hours it will take to do the job. In new home construction projects, the hourly pricing format is rarely done, as the interior design service provided to builders and developers is a line item in the entire project budget. It needs to be a fixed dollar amount.
When determining project design fees there are a few factors that need to be considered:
- How does this service solve the customers problem?
- What unique benefits does your service offer?
- What are your competitors charging?
- What impact does this service have on their specific project and in turn their business?
Lastly, the biggest factor in determining a fee, is market position. Market position is a strategic process which involves the brand image in the customers’ minds. There are plenty of variables that will affect how the brand is perceived. Just think of Tesla vs Toyota.
Value and price are not synonymous with each other, involving many factors and considerations. By focusing the attention on what the service will provide, what problem it will solve for the client and what the value of solving the problem is worth. This method results in a win-win relationship which is mutually rewarding to both parties involved.