I like this piece from Blue Favor on project pricing. Their attitude is very similar to mine when it comes to the subject of client / service provider relations:
Today we are going to break an unwritten rule for agencies, we are going to reveal an important page from our playbook on how we price a project. What is somewhat ironic is that we think it's a pretty bad rule, that one of the last things we think anyone should hide from a potential client is how your pricing works.
The pricing system they discuss isn't exactly what we use at SEOmoz, but it's a good starting point:
When we price out a project we not only price out what we know about the project, but also detail what we don't know. We come up with worst-case scenarios, address risks, point out all the things we think could impact meeting the goals of the project.
When we make an assumption, we call it out. And if this price is going to get you three comps and three iterations, then we try to set that expectation up front. To come up with a number try using the following formula:
task x time(complexity x effort) x rate = price
They're also using an hourly rate calculation system:
So the formula for a low-level web designer might look like this:
($20k expenses + $60k salary) ÷ 1,500 hrs + 10% margin = $58.66/hr
As far as our pricing system works, it's largely based on the following factors:
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Who is working on the project (Rand, Matt, Kat, Rebecca, etc.)
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How many hours we expect to spend on the project
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Hard time vs. Easy time - many projects, tasks and clients are not enjoyable to spend time on, while others are a true pleasure - this heavily impacts pricing
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Profit margins & overhead - while these were once very small numbers, as with any growing business, they become larger over time in order to permit growth
I'd love to hear from other folks about how you price SEO/M projects and what you believe to be the most valuable elements to include.
This day shall appear, sooner or later. At some point, SEO consultants will get compared on results and heads will be cut (I'm kidding).
While this is pending, learn the most you can, attend any conference about seo/sem, talk about it, spread the love, but the white hat love only ;)
I think so its good idea to educate client about every possibility, risks and way to handle worst situation. I found clients are now interested in knowing what benefits they are going to get out SEO services.
I agree with all stated, however I would add that there is a value component, similar to Guillaume's mention of increasing cost as you gather more knowledge.
Some people price their service just on an hourly basis. I view that as a commodity service pricing. I suggest that is not an accurate way to position our value if our business has considerable experience in developing value for our clients. As a value driven business segment, I suggest we price our services based on the value we deliver. It is harder to sell, but if we don't do that we may risk commoditizing the industry.
Great point. I think that this has already happened. Lots of incompetent people are charging expert prices on projects that yield crap results. Sold already as a commodity - regardless of performance as the price is set in advance.
How can the TopGun SEOs put pressure on those rustlers and get the reward that they justly deserve?
Oh and I forgot to mention one keypoint I think concerning SEO/SEM/Web design/Web hosting services. For the hourly rate, and I guess this is evolving with time as we gather more knowledge/skill/tools/modules/people/experience, we charge more per hour (personnaly, I never thought it was only a matter of "experience", it's more a matter of combined knowledge, experience and continuous experimentation that leads to raise your hourly fees).
So, as an exemple, when NVI was launched 1.5 years ago, we were charging 40$ for programmation/design and were not offering any SEO/SEM services. As of today, with a in-house concept of pushing the limits on every aspect of our business, after 16-17months, we charge 75$CAD for design / programmation and 125-150$CAD for SEO/SEM services.
And sometimes, when we really do believe in a project, we can take some shares in it while not biling anything or be rewarded through a share of what the website generates for our customers. Sometimes, some of the SEO/SEM work we do can be paid on results or with a % of expenses (especially for PPC campaigns).
Hope it helps! I wanna know your hidden agenda about that too, mine is all yours now :D
Guillaume - I think you're right on about increasing prices as time goes on. It's both a supply/demand issue and one of experience and success. If I go out looking for an inexperienced plumber, I expect him to cost less than the one with 4-5 years of projects under their belt.
At NVI (New Vision of Information), our Montreal-based company, we deliver, most of the time, two quotes to our customers.
The first one consists of the "conception quote", which includes everything that is bound to the actual site (site architecture, web design, on-site optimization, photography, writing, programming, flash development), usually priced at a fix cost based on a call we do for the amount of hours it will require. Basically, we commit to a "chunk" of money to deliver what the customer expects.
The second one consists of the "commercialization quote", which include all the marketing part of the solution, like organic seo development, ppc/sem campaigns, newsletter implementation, blog/forum implementation, banner advertizing. For this one, we get an defined amount with our customer and explain to him how those tactics will be tracked, analyzed and optimized to deliver the best ROI possible.
Basically, the 1st time you deal with NVI, you get 2 quotes, one allows you to build the site, the other one helps you get you traffic. Afterwards, we sit down with our customers every year (or more often, if required) to discuss about the upcoming year, we analyze what happened and we get a new proposal for the year to follow. This allows us to stay really close to our customers and also provide accountability for anything we do. And what do we deliver? RESULTS!
This is interesting because with my last company, a web development/marketing firm, we'd get hours estimations from the developers and designers and then double them before multiplying by a blended rate. Our developers were notorious for underestimating "scope creep" and the like.
With my current company, we only do a flat rate retainer with PR campaigns. With SEO it's very much like the forumla described above.