- The average billing range of the consulting industry is from $125 to $400/hour.
- With an ideal pricing strategy, consultants can do better market positioning, attain high perceived value, and be profitable.
- Consider factors like target audience needs, revenue objectives, market demands, competitors, and your USPs before choosing a pricing strategy.
The average billing range of the management consulting industry ranges between $100 to $350/hour.
If you are looking for answers to questions like…
- On what basis do I decide my consulting fees?
- Or what are the best consulting pricing models?
- How can I choose the most effective pricing framework for my consulting service?
This blog answers all.
Ensure you read it till the end to learn the steps to determine your ideal pricing strategy to go with.
- Why is it important to choose the right pricing strategy?
- 15 different consulting pricing strategies to choose from!
- 1. Hourly pricing
- 2. Project based pricing
- 3. Value based pricing
- 4. Retainer-agreement
- 5. Competitive pricing
- 6. Cost based pricing
- 7. Dynamic pricing strategy
- 8. Penetration pricing
- 9. Premium pricing
- 10. Psychological pricing
- 11. Geographic based
- 12. Skimming pricing
- 13. Freemium pricing
- 14. Bundle pricing
- 15. High-low pricing
- Choosing the right pricing model for your consulting firm: Adopt these 5 best practices
- Wrapping up
Why is it important to choose the right pricing strategy?
Choosing the right pricing model is profitable and impacts other business factors. It has benefits beyond monetary terms. And accompanies various factors, such as:
1. Perceived value
Perceived value refers to the benefits the client receives for the price paid for your services. Less charges can make your clients assume that you provide low-quality work.
When you set high charges, they might think it is expensive and expect nothing less than the best. However, choosing the right pricing model helps you to get the best recognition for your work.
2. Market positioning
The right pricing plan helps in positioning your market presence adequately. This ensures that you always attract the right clients for your business.
You must modify your consultation fees when the business grows based on your experience and expertise.
Setting low prices will attract lots of clients but would lead to financial instability and burnout.
On the contrary, setting higher prices will push your potential clients away, resulting in a business loss in the long run.
Hence, choosing the right strategy will bring potential clients and let you stay on the profitability side.
4. Client expectation
When you charge a high price, clients expect premium services from you. Conversely, when you set low prices, they have lower expectations from you.
This is because, with a low pricing plan, they paint a picture of you that doesn’t match standard quality.
This is why you must bring a common price matching your client’s expectations. And also does justice to your business.
Continue reading to understand the types of consulting pricing strategies, and then discover the best way to choose the ideal pricing strategy for your consulting firm.
15 different consulting pricing strategies to choose from!
Your consultation business has various processes and hence there are different consulting pricing strategies for you to choose from.
In this section, we’ve handpicked the most relevant and popular pricing strategies for consulting business. Ensure to read each of them thoroughly.
|S. No.||Consulting pricing strategy||Definition||Best for|
|1.||Hourly pricing||Pricing is set as per the amount of time spent on a project or service delivered.||Legal and training consultants|
|2.||Project-based||Pricing is set based on the project type, size, and efforts needed to get the projects done.||IT and management consulting|
|3.||Value-based||Pricing is set considering the impact your service or offerings create on your client’s business.||Strategy and marketing consulting|
|4.||Retainer-agreement||Pricing is set based on the ongoing relationships with clients. It is a contract between you and your client to provide services for a set period.||For IT and public relations consulting|
|5.||Competition based pricing||Pricing is set based on the ideal competitor’s pricing structure and strategy.||For HR and accounting consulting|
|6.||Cost-plus based pricing||Pricing is set by considering your consultation costs along with the profit margin.||For construction and government consulting|
|7.||Dynamic pricing||Pricing is set based on market demands and other external factors.||Travel and technology consulting|
|8.||Penetration pricing||Pricing is set in a way considering factors that favor business penetrate in the target market.||Small business and strategy consulting|
|9.||Premium pricing||Pricing is set considering your USPs and high-end services that your competitors cannot provide.||Luxury brand and creative consulting|
|10.||Psychological based||Pricing is set focusing on the psychological impact you create on your client’s project with your services.||Sales and business consulting|
|11.||Geographic based||Pricing is set in a way that goes well for consulting services to operate their business in different geographies.||International business consulting.|
|12.||Skimming pricing||The pricing strategy suggests keeping higher prices at the beginning of your new product or service launch and reducing them over time.||Technology and innovation consulting|
|13.||Freemium pricing||This strategy suggests keeping a basic version of your services for free and charging prices for the premium versions.||Technology and software consulting|
|14.||Bundle pricing||Pricing is set based on the number of services offered in a package.||Financial and management consulting|
|15.||High-low pricing||This pricing strategy suggests high prices for services during their launch phase and gradually reduces prices to stimulate demand.||Retail and hospitality consulting|
1. Hourly pricing
Hourly pricing is a common strategy among consultants, freelancers, and other service-based professionals.
It is a straightforward pricing strategy involving charging clients according to the time spent on a project or service.
It is a transparent pricing model that justifies your effort for the client’s project.
They get an understanding of the hourly work, and as a consultant, you get track of your time.
This ensures that you’re fairly compensated.
The other benefit is you can increase your revenue by working more hours. It is suitable for consultants whose work scope varies from project to project.
To be concise, it is not suitable for long-term projects as it may be difficult to estimate the accuracy of the total number of hours spent.
- Transparent and easy to calculate as you track your hours of work time
- Good for short-term projects where the scope varies from project to project
- Difficult to estimate the accuracy so clients may feel being charged for slow work or inefficiencies
- Focus is on billable hours over the actual results delivered
2. Project based pricing
This consulting pricing strategy guides you to charge fees according to the project you undertake.
Instead of charging them at an hourly or per-service rate, here you charge clients on the scope and duration of your project.
The client gets a particular pricing plan, and you feel motivated to complete the project within the set timeframe.
However, the major drawback is to estimate the cost of the project.
Hence, to receive successful results from this strategy you need to have an accurate estimation of its project’s scope.
Project-based pricing strategy is used commonly by marketers and consultants where every project is specific to its requirement.
Moreover, it is ideal for freelancers and agencies handling large or complex projects with well-defined milestones and expectations.
For example, a human resources consultant may offer a fixed fee of $10,000 for a project to develop a performance management program for a client.
The consultant would define the scope of work, deliverables, and timeline for the project and then quote a fixed fee for completing the project.
The fixed fee would be based on the estimated time and resources required to complete the project, plus offers greater profit margins for the consultants.
- Clear scope of work and deliverables
- Budget can be accurately set for clients with their specific requirements
- Difficult to estimate the ideal project costs accurately
- Scope creep might cause an exceed the initial budget of the project
3. Value based pricing
This pricing strategy considers the impact your service or offerings create on your client’s business. And then charge the fees accordingly.
One of the benefits of this pricing strategy is that you help your clients bring their best by creating higher value, as here, your fees depend on the value they bring.
So, better results can help your quote or get higher consulting fees for future projects.
Moreover, this also increases client loyalty and meaningful partnerships as you’ve served clients with the best results.
Also, they tend to come back again and develop a great partnership.
This pricing strategy suits consultants who provide high-impact and specialized services. Further, deliver significant value to their clients.
Value-based pricing strategy is ideal for businesses targeting a niche market. They are the audience who desire a standard result and are willing to pay a higher price for your services.
- The consultant’s fees align with the value they provide to the client
- Offer room to make higher profits for the consultants
- Requires a deeper understanding of the client’s business and their goals else won’t work
- Sometimes, difficult to quantify the value provided
Retainer agreements are used to establish an ongoing relationship with clients.
It is a contract between you and your client in which you agree to provide services for a set period. And in return, they agree to pay you regularly for the same.
To set the price, you need to consider various factors like the scope of services, level of expertise, and the amount of effort and time.
Some consultants charge a fixed monthly fee, while others consider hourly work. This strategy is a win-win for both parties.
- Provides a stable and consistent income source for the consultants and encourages a long-term client relationship
- Offers predictable prices, clarifies the mode of communication, and specifies access to deliverables.
- Clients might not see the value in paying for consulting services which they don’t use
- Scope creep might lead to more working hours than expected without additional compensation
5. Competitive pricing
This strategy is used by independent consultants and consultancy firms and is based on market competition.
With proper research, you can compare your prices with your competitors in the industry.
Further, strategize them in a way that attracts new clients and helps in retaining existing ones.
This strategy should allow you a reasonable profit margin; else, it will not be sustained in the long run. In addition, with this pricing strategy for consulting businesses, you can easily tap new markets.
This strategy would only suit certain industries, target audiences, and business goals.
For instance, if you’re targeting a wide audience charging less can be workable.
- Can be effective in competitive markets as it keeps prices relevant to industry rates and standards
- Easy to understand for clients and also, they can compare different service providers.
- Doesn’t take into account the consultant’s unique skills and expertise
- Can lead to a race to the bottom in terms of pricing as it doesn’t calculate the cost incurred by the business.
6. Cost based pricing
The drawback of the previous strategy is the primary element of this pricing model. Here, you consider a price requiring you to calculate your consultation costs and the profit margin.
This consultation cost includes all your overhead expenses along with the basic fare.
This ensures that you always earn profit in your projects. It is best for certain consultants who clearly calculate overhead expenses, time, and resources to complete a project.
Cost-plus based pricing model is suitable for businesses that prioritize pricing transparency.
Here’s an example of a graphic design consultant. They may have an estimated time of 20 hours to complete a branding project for a client.
This would determine their total costs for the project, including overhead expenses such as software licenses and office space, will be $3,000.
The consultant would add a markup to their costs to determine their fee. For example, they may add a 30% markup, resulting in a total fee of $3,900 ($3,000 x 1.3).
This would ensure that they are covering their costs and making a profit on the project.
- Profitable if costs, time, and other resources are managed effectively
- Ensures that all the overhead expenses are covered
- Doesn’t consider the cost charged by the competitors
- Doesn’t consider the value provided to the client
7. Dynamic pricing strategy
This pricing model lets you set your consultation charges based on market demands and other external factors.
You need to monitor market trends and demand patterns to set a real-time pricing plan. However, it is an effective way of maximizing revenues.
When the market is at its peak, you charge higher prices and vice versa.
Plus, you need a sophisticated pricing algorithm and data analysis tools to adopt a dynamic pricing structure.
Market fluctuation can leave your clients dissatisfied or annoyed due to inconsistency.
Hence, it is suitable for consultants who work in market conditions where the demand keeps fluctuating.
Industries with ever-changing demand and supply chains, like travel consulting, can benefit the most from this strategy.
And so, it is important to understand consumer behavior and your industry for easy adaptability of this strategy.
For example, a software consultant may charge a higher hourly rate during peak demand periods.
They can charge a higher price during the fiscal year-end as many businesses rush to complete their financial reporting. But, on the other hand, they may offer discounts during the slower period.
- Can respond quickly to changes in market conditions or demands
- Can maximize your profits during peak periods
- It might be difficult to communicate the rates fluctuations to clients
- Market fluctuation can leave your clients dissatisfied or annoyed
8. Penetration pricing
As the name suggests, this strategy is used by consultants and consulting firms to enter the market.
This price is low compared to the market prices. The primary motive for using this is to increase sales volume.
Hence, it is suitable for consultants who are entering a new market or launching a new service.
Another limitation of this strategy is it can lead to a price war in the market. This may make it unsustainable in the long run.
For example, a new marketing consultant may adopt a penetration pricing model to attract new clients and gain market share quickly.
They can do this by offering a promotion to new clients, where they offer a 20% discount on their standard hourly rate of $150/hour for the first three months.
This would make their services more affordable and attractive to potential price-sensitive clients.
- Can be helpful in building a client base quickly
- Effective in gaining market share faster
- Can be a risk of having a low-profit margin in the short term
- Might be unsuitable not for long-term
9. Premium pricing
This can be used by consultants who offer high-end, unique, or exclusive services.
This premium pricing strategy for consulting services charges higher than the average prices in the market with a primary motive to make the clients aware of your exclusive offerings.
With high prices, you’ll have a niche audience that brings you huge profits but also limits your client base.
It can also be used by well-established consultants having rich experience and expertise.
In all, while adopting the premium pricing strategy, you must consider market demand and the unique value proposition you offer.
- Can position the consulting firms as a high-end provider
- Good scope for setting a higher profit margin
- This might limit the consultancy’s market reach
- Might not be competitive in the price-sensitive target market
10. Psychological pricing
This is based on the psychological impact you create on your clients.
It considers human behavior and emotions to persuade consumers to believe in your offerings and avail your services.
As a consultant, you can set fair and reasonable prices while maximizing revenue.
One of the common techniques of this pricing model is “charm pricing.” This basically believes in setting the price below the round figure. For example, providing a service at $99 instead of $100.
This creates a psychological effect on the consumer in believing the price to be significantly less than what it is.
Another technique is to offer tiered pricing options. In this technique, clients choose from a range of services at different price points. Again, it makes them feel in control of their purchasing decision.
Basically, the motive is to create a higher value perception without reducing the price.
For example, setting the price as $19.90 instead of $20 enables the client to round prices to their nearest whole number.
This strategy can boost sales and attract clients but also has a downfall. When overused, it can damage brand reputation.
- Can influence the perceived value of the consulting services
- Offers the high opportunity to increase sales, revenue, and upselling
- Might be difficult to implement effectively
- Not so ethical or transparent to some extent
11. Geographic based
It is adopted by consultants who operate in different geographies. Further, it considers factors like average income, cost of living, competition, and local demands.
This includes adjusting prices for specific services based on the demands in specific locations.
For instance, an international consultant may charge different rates for clients in different countries or regions.
Moreover, you can also consider offering discounts and promotions to incentivize business in specific regions.
However, these price differences may create problems. You must have clear and transparent communications with your clientele to avoid these issues.
- It can include regional differences in costs and demands
- Helps businesses tailor their pricing to local markets while remaining competitive in different locations
- It might be ineffective in global or national markets
- Differences in pricing may create problems
12. Skimming pricing
This consulting pricing model is best for launching a new product or a service.
Here, you initially set higher prices and reduce them over time.
The motive is to capitalize on the early stage of the product. You can attract early adopters who are willing to pay a premium price for the latest service.
This approach is beneficial as it allows you to generate revenue quickly. Further, let’s you recoup the same in another research and development.
It creates a perception of exclusivity and limits the client base, so it is not suitable for all industries.
Mostly used by consultants who provide unique services that competitors do not offer in a similar region.
Hence, suitable for businesses with exclusive access to new, unique services, such as a tourism company offering exclusive tours of an unexplored region.
- Helpful in building the brand’s perceived quality and increasing profit margins
- Can position your consulting business as a high-end provider
- This may limit the consulting firm’s market reach
- It might be unsuitable for long-term
13. Freemium pricing
The freemium pricing strategy suggests offering a free basic version of your services and charging a price for the premium versions.
Consultants leverage this pricing model to increase their brand awareness and establish trust among their target audience. As a result, it is majorly used by the SaaS industry.
For instance, a marketing consultant could offer a free consultation to potential clients to discuss their business needs and challenges.
They could then charge for additional services, such as a full marketing strategy plan or support to optimize the current marketing strategy.
This strategy brings more users to join your trails and sessions. However, finding the right balance between the free and paid packages is vital to avoid cannibalizing revenue.
There may be instances where clients may become content with the free plan and not upgrade to the premium plan.
- Enables to attract many clients quickly
- Can be more effective for markets with low barriers to entry
- Less scope for profitability in the short-term
- It might not be sustainable to implement this in the long-term
14. Bundle pricing
As the name hints, it’s a consulting pricing strategy that allows you to club various services and quote one single price.
This pricing model increases sales by encouraging clients to buy more than originally intended.
One of the perks of using a bundle pricing model is experiencing increased customer loyalty. This is because the plan offers a convenient and cost-effective way to purchase multiple services.
However, it can be done only when you represent it correctly. You must make your clients believe that bundled services are complementary and beneficial.
For example, a marketing consultant offers a bundle package that includes social media management, email marketing, and content creation services at a discounted rate.
This strategy only works when the bundled price is lower than what the single items would cost.
It is ideal for consulting businesses looking to promote new services, such as a business coach who might bundle face-to-face coaching services with course materials or templates.
- Can increase your sales and revenue
- Can encourage clients to consider buying more than one services
- Difficult to communicate the value charged for the bundle
- Ineffective for clients who are asking for specific services
15. High-low pricing
This pricing model suggests high prices for services during their launch phase and gradually reduces prices to stimulate demand.
The primary motive is to present the offering as high-quality and exclusive, then later attract price-sensitive clients.
This smart approach creates a buzz around your new products or services and attracts high-end clients.
However, the only risk is that clients may feel cheated long-term. This can be due to them discovering that the same product or service is being offered at a lower price later.
Unlike price skimming, high-low pricing involves sudden price changes. As a result, high-low pricing is suitable for businesses with new and unique services that competitors may copy in the future.
For example, a consultant could offer a package with a complete analysis of the client’s retail business.
This could include brand positioning, store design, product assortment, pricing strategy, and ongoing support for a fee of $75,000.
However, with time they can charge it for $60,000 and grab a larger client base.
- Let you attract price-sensitive clients while still maintaining profitability
- Can create FOMO to purchase in some periods
- This might lead to a perception that your consulting services are inconsistent in value
- Highly difficult to communicate to clients regarding the rationale for price fluctuations.
Choosing the right pricing model for your consulting firm: Adopt these 5 best practices
Before choosing among those 15 pricing strategies, consider common pricing strategy concerns to identify your…
- Target audience and budget: Determine your ideal customer profile and buying persona to discover the right pricing for your consultancy.
- Costs and overhead expenses: Consider all the fixed and variable costs and possible overhead expenditures when pricing your strategy.
- Revenue goals and profit margins: Consider your revenue target in mind.
Keeping all the factors in mind, here is the step-by-step process of discovering the ideal pricing system to go with for your consultancy business:
1. Discover your consulting firm’s weaknesses and strengths
You need to find all the value propositions, USPs, and weaknesses to help you adopt the ideal pricing strategy better.
For instance, if your consultancy is specialized in serving innovative solutions, value-based pricing might be the right fit.
On the contrary, if the consultancy is dedicated to delivering projects consistently, then retainer-based or hourly-based pricing would be suitable.
2. Try to understand your target client’s need, pain points, possible solutions, and preferences
Analyze your client’s current and future needs. Also, discover their preferences to determine the most suitable pricing model.
For instance, if your clients come from a cost-sensitive audience, then project-based or bulk pricing might be suitable to go with.
On the other hand, clients who prioritize results and outcomes will be comfortable with performance-based pricing.
3. Evaluate your competitor’s pricing and strategy
This practice is crucial for people who are new in the market and don’t know which pricing model to ideally begin with.
Identify the opportunities or gaps while evaluating your competitor’s pricing model to outperform them.
For instance, if your ideal competitor is offering only project-based pricing, offering value-based or retainer-based pricing might give you a competitive edge.
4. Examine the market trends and demands
Be updated with your current market demands and competitors to adopt a better pricing model.
Let me explain to you how it matters.
For example, if your target market demands customized solutions, adopting value-based pricing will benefit your consulting firm.
However, hourly or project-based are the best pricing models if the market demands standardized consulting services.
5. Test to optimize your pricing strategy
Once you’ve analyzed the most influential factors for your consulting services and decided on an ideal pricing strategy, now is the time to test before adopting it full-fledge.
So, begin testing your pricing strategy among a smaller group of potential clients and collect feedback to analyze results.
Here’s an example: if you’ve decided on value-based pricing to test with, you need to optimize it, considering how well it aligns with the client’s perceived value.
Here are a few tips to better optimize your complete pricing system…
- Offer tiered pricing options to cater to clients with varying needs, budgets, and preferences.
- Bundling your consulting services into packages will help you increase the perceived value and encourage them to spend more.
- Offer exciting discounts to attract new potential clients and incentivize by upselling.
- Be transparent about your pricing and always communicate this clearly with your clients to build trust.
- Review your pricing strategy from time to time to miss any occasional opportunity.
Firstly, remember that choosing the right pricing strategy is crucial for consultants for multiple reasons.
It defines not only your profitability but also the quality of work, market positioning, and values of your services.
Among 15 pricing strategies, you can go for that pricing framework that helps your quote the right price for your consulting services.
In this competitive environment, client expectations change from time to time, so you need to be very conscious while selecting pricing strategies that fit your target customers and align with your revenue goals.
If your consulting firm can offer your clients the most appropriate solutions, it would increase sales volume.
Finally, don’t miss optimizing your pricing strategy depending on the current market and customer demand.
Many enterprise-level businesses hire pricing strategy consultants who take help from pricing strategy consulting firms to decide on their products or services.
Moreover, hiring pricing strategy consultants can be a cost burden you can avoid by following the steps to choose the ideal pricing framework discussed above.
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