As a consultant, I’m realizing more and more the value of “productizing” a service.  At the moment, everything I do is bid for piecemeal and is thus negotiable.  I set a target for my hourly salary and bid on projects such that I can meet that while still paying other necessary business expenses (software licenses, sub-contractors, etc).  Such an ambiguous pricing model eventually finds me charging one fee for one client, and a different fee for another.

Since I’m a huge proponent of ethics and fairness in the business world, you can see why this frustrates me.

I once asked a colleague how they priced their services.  Their answer – “I charge a certain rate to clients I like, and I add 50% for clients I don’t want to work with.  In the end, though, it depends on the project, how much time I have, and how good of a negotiator the other guy is.”

Yeah, that doesn’t really work for me.

I’ve spent the past few years trying to establish some sort of metric with which to measure my fees.  Certain people see projects and deliverables like products sitting on a shelf.  Giving them an ambiguous hourly rate doesn’t really sate their need for information – more often than not they’ll end up forcing me into a reverse auction with a consultant in India.  That’s not a place I like to be.

So I’ve kept track of my fees for various projects, both web and marketing-based.  A certain kind of project will always take a certain amount of time.  There’s a range involved, so I’ll bid at the high point of that range and give myself a little room to negotiate and be flexible on my pricing.  Still, knowing what to charge based on past business deals makes my life run much more smoothly in the long-run.

A mentor of mine once tried to explain to me the value of productizing your services.  She said it was a great way to take the guesswork out of bidding, but I didn’t understand at the time how a “service” could be amounted to a “product.”  Looking at things from the clients’ point of view, though, I now understand how the service brings about an end result – the product.  For a client, it doesn’t so much matter how many hours you spent doing what, they just want to know how much it will cost for the final deliverables.

Armed with this new knowledge, I’ve broken some of my services up into discrete project-types to create “products” from them.  You have a basic website with/without design, an advanced website with/without design, marketing strategy with/without executional oversights, copywriting with/without publication and distribution, etc.  It’s actually quite a long list, but I feel much more comfortable giving prospective clients quotes knowing they’re based on past work, not just my inner drive to meet sales quotas.

How do you price your services?  Do you work on an hourly budget or are your services appropriately productized?