Agency Pricing Strategies

Written by on Thursday, April 7th 2016

Agency Pricing Strategies

After having decided to dive into the app-selling business, it’s time to consider the main reason for this endeavor : cash—both the inflow and the outflow. Today we will focus on the former, and raise some points you should think about when implementing your pricing strategy.

More times than not, the first thing your prospective client will ask when learning about your services is the cost. There are several ways you can choose to charge for your app services.

Subscription Based

The benefits of subscription based pricing are obvious on the side of the client—there is no scary, up-front price tag and there is no commitment in the case they aren’t satisfied. It’s a much safer bet for someone who isn’t completely sold on the idea of investing in an app.

The outcome for you can go either way. If the customer sticks around at least past the break-even point of their cost to you, subscription based pricing tends to be more profitable in the long run than a one-time purchase. However, short-lived client relationships will cost you; those who drop the subscription after just a few months will not help you to recover your costs, let alone make a profit, so an educated estimate on average client lifetime length will be a great help when considering the subscription pricing model.

In order to avoid the short-lived client scenario, consider offering discounted subscriptions that last a longer period of time, like a 6 month subscription that includes one free month, or a cheaper monthly fee for auto-renewable payments. Your client will be happy to save costs, while you will have a more stable, guaranteed income.

Flat rate

Here we are talking about anyone being able to tack an app onto their package for a standard price that you have set for all apps. Giving the client the option to “buy and own” an app is traditionally the way developers work, but things can get tricky if you’re using an app builder. If one day you decide to leave your app builder, according to your buyout agreement your client probably still has the rights to this app, so you will have to find a way to pass it on to them. You can always be upfront with them about the usage of an app builder, and an agreement can be made for them to maintain their app using their own account or transferred to another platform.

Many web agencies used to tell their clients they were creating their websites from scratch, when in reality they were using WordPress. Things are starting to change—agencies are realizing there’s no shame in being open about the fact that they are using a widely established and accepted technology, and the added value the client pays for is their creativity and work. Keep this in mind as something you may do when giving your client "full ownership" of their app in using flat rate pricing. 

Value pricing

Another option is to charge clients (either flat rate or through a subscription) based on the features and upkeep required for their app. For example, charging per number of push notifications, charging by the amount of sections, charging for custom features that take time to develop, etc. Not all apps are created equal and you deserve to be compensated for those that are more complex than others. Customers requiring very basic apps will also appreciate paying only for what they need.

Does everyone pay the same?

At some point, you will inevitably have a client who wants to negotiate on pricing. It’s good to have a plan ahead of time that determines exactly who gets a discount, how much they get, and where you draw the line. The common contenders for discounts usually include non-profits, educational institutes, and startups, and more times that not, without a special offer they will not be able to use your services at all. Less income is better than no income, so for these cases be prepared to make them a special offer in order to avoiding losing their business all together.  

If you're not sure where to start as far as the price itself, consider this : the price should at least cover the cost of the technology itself (in other words, the cost of the subscription). After that, the rest of the price should reflect the value of your work, as well as what this product is worth in your marketplace. Depending on what your local competitors are charging, and what you can or cannot offer compared to them, a safe bet is to start out charging somewhere in the middle range market price.