Creative Freelancers, Are You Being Unfair by Charging More for Certain Clients?
Your second in line at the grocery store checkout and can't help but hear the clerk calling out items and prices from the first guy's shopping cart, "Frozen pizza - $4.89, paper towels - $2.49, 6-pack of Red Bull - $5.99..." You casually observe, "Wow, this guy's got a lot of the same items I do, how odd." Anyway, when it's finally your turn, you approach the register and smile, but instead of being hit for $5.99 for your Red Bull like the guy in front of you, the clerk calls out, "6-pack of Red Bull - $6.75".
Imagine what's running through your mind at this point, you've got to be thinking, "What the heck is going on here? How can this idiot charge the dude in front of me $5.99 and hit me for $6.75?!?!"
However you plan on handling your frustration: calling over a manager, calmly pointing out the oversight, punching the clerk in the stomach (I don't recommend this) - it's probably a safe bet that you feel you've been treated unfairly.
Shifting the story now to freelancing, let's put you in the position of the checkout clerk - do you feel its right to charge clients different prices for designing a business card, web site or logo - or should everyone be paying the same amount? Let's say you're cool with charging clients different rates, how do you do this so that they don't feel they're being screwed? Furthermore, how do you manage "damage control" if/when one client finds out she/he was charged more than another client? How do you justify charging different rates when in the previous example you felt you got a raw deal?
Could You or Should You Charge Clients Different Rates/Prices?
It doesn’t matter who you ask this question, I promise you're going to get a number of different answers from freelancing experts. The reality is that some professionals charge clients different rates/prices and some have decided against it.
If you're itching to know where I stand on the issue, yes I do charge clients different rates/prices - would I insist that you follow my lead? No. Ultimately the choice is yours, but I will outline why I've elected this approach to pricing, and I'll let you decide how you want to handle things - fair enough?
Let's look at the issue from this angle: are freelancers the only ones to charge different people different rates/prices?
Not a chance - how about restaurants offering discounts to seniors, early bird specials; grocery stores honoring coupons and frequent shopper cards; car dealerships offer first-time buyer incentives and movie theaters charge more for adults than children. Different pricing for different people is all over the place (and is widely accepted by most people). Of course there are vendors that have one rate/price for all, but there are LOADS of them out there that do not.
Going back to how this relates to freelancing, think about it this way - no two projects, clients, time-frames and final deliverables are EVER the same, so it might be unrealistic to expect that you'd have a one price fits all approach to billing clients.
My fees (and most likely yours) are based on a number of different factors, which will affect the amount of time, energy and resources I need to invest in a project to complete it. If the amount of time, energy and resources varies from client to client (even though they both had me create the same project) is it acceptable that this may result in one client paying a little more/less than another one? For me, the answer is a clear, "Yes", but you may decide against charging different rates/prices even after hearing my arguments for it - that's okay, you need to be comfortable with your decision. We'll now look at some things you definitely need to keep in mind if you decide to charge different rates.
So You've Decided to Charge Clients Different Rates/Prices - Don't Forget These Tips:
The most valuable piece of advice I can give you in regards to charging different rates/prices to different clients is to avoid drawing attention to it.
This begins with you (at virtually all costs) avoiding a discussion with one client about what you charged another one - it's really none of their business. If a client does press you for some information you might respond with, "I can appreciate you being a little curious about this, while every project/client/timeline/circumstance is different, I've researched other company's pricing structures and worked hard to ensure everyone's (including you) is getting a great price and value for their investment. Does that sound fair?" You of course may want to say what's most comfortable to you (use my words as a guide); the important thing is to address the client quickly and directly, and then move on.
In regards to your contract, I'd suggest that you really don't need to address this idea of differential pricing; it's not necessary and will most likely cause confusion or more questions - KISS (keep it simple, stupid). From my experience I've found that my pricing policies towards other clients are just best left unsaid.
Explaining to Clients Why Your Rates/Prices May Vary
If by unlucky chance one client finds out what another one paid you, don't panic. Yes, this can be awkward, especially if they're a little upset, but if you address their feelings quickly and professionally, you can easily patch things up.
What you'll need to remember is that it's natural for a client to initially be a little put off if they found out someone else got a better price than they did (so avoid getting upset or being rude). Many of your clients and mine have completely different pricing structures, so without any explanation your system (or mine) might sound unfair to a client at first.
In order to move past this you'll want to provide your upset client with a quick and professional explanation on how you bill. No, this doesn't mean that you have to feel that you're on trial or that you have to defend yourself, but if you were in the client's position you'd probably want some form of an explanation (remember our grocery store example above).
If you do get into a sticky situation whereby one client found out what another one was charged, you can use following reasons to fairly explain differences in your billing rates.
Your rates can vary from one client to another because of:
- Perceived difficulty of the project. For example, this client already had 2-3 concrete ideas of what she wanted her logo to look like, or this client already had most of her web site designed, you just needed to finish it off.
- Number of revisions negotiated. If you negotiate a deal which limits the client's revisions, they probably should get a discount versus client that have "unlimited" revisions.
- Amount of work coming in, perhaps you were running a sale to bring more business in.
- Changes in the economy and/or your pricing structure. By the way, your clients CAN'T expect you to always keep the same prices when the economy goes up and down, nor should they expect that you keep the same pricing structure for years and years. What you charge in 2012 might look quite different from what you charged in 2009.
- Other projects the client may have hired you to do as well (in which case you gave them a discount for hiring you to do multiple projects rather than one at a time).
- The actual scope of the project can and often does differ quite a bit from one client to another. For example, 2 clients want a business card, the 1st client has told you she wants a nature scene on her card, and has provided you the stock photo she wants to use in the background. Compare this to the 2nd client that says, "Uhh, I really don't know what I want, just make it cool". Do you think there could or should be a difference in how much each of these clients is billed? I think so.
Whatever reason(s) you use is up to you, I'd just encourage you to be honest and professional about it. Make sure you provide your explanation calmly and succinctly...then move on (avoid rambling on or dwelling on it. If you make a big deal about it, you'll probably make the situation worse).
Bottom line: if a client inquires about your differential pricing approach to billing, don't avoid their inquiry, make light of their inquiry or get upset at them for making the inquiry. Instead address your client's question/complaint directly, calmly and professionally, and then move on.
