Seth Godin recently published a blog post titled When to charge by the hour. And while usually I agree with most of what he writes, this time, I have a different point of view.
First, in principle, I do not believe anything should be priced by the hour. The customer is buying the outcome of the service, not the hours and minutes to create it (inputs).
Second, pricing by the project is better if the price is based on the value to the customer. Usually, a project price is a fixed price based on an hourly estimate. Ron Baker, the founder of VeraSage, calls it “hourly billing in drag“.
Third, one example Seth mentions in the article is back massage. Yes, massage therapy is conveniently packaged in time blocks (one-hour, 90-minutes, etc.). However, the customer is buying the result of the service, not the time.
Fourth, another example he mentions is logo design and the possibility of revisions. In this scenario, it is the professional's responsibility to write a clear scope of work and educate the customer during the buying process.
A better way to define the scope of work is to offer the customer options. For example, a logo with one round of revisions is $X; with three rounds of revisions is $Y; or with unlimited revisions is $Z.
Ultimately, the service professional should use his expertise and experience to offer the customer a fixed scope of work for a fixed price based on the value created.
Markus Hartmann says
I wish there would be a comment section on Seth Godins Website to correct his error or at least answer to his thesis. But obviously there is none. But of course: You are totally right, Kirk. What about inviting him to your show. I would love to hear the discussion about that topic!
Kirk Bowman says
Good suggestion Markus! Thank you for stopping by.