In this edition of Ask UXmatters, our experts discuss whether it is a good idea to offer fixed-price or fixed-duration UX design services. In exploring the pros and cons of such services, our expert panel suggests that designers consider how well they know their client and how familiar they are with the details of a project. Our expert panel also discusses whether designers should charge according to the value they provide or simply for their time. The panel discusses the risks of fixed-price services and cautions designers against commoditizing their services in the marketplace.
Our expert panel also considers offering some combination of hourly, fixed-price, and monthly retainer services and where each of these approaches is most appropriate. The panel explains some common pitfalls of offering fixed-price services and provides alternatives to offering fixed-price or fixed-duration services. Finally, the panel advises UX designers to create a Statement of Work that clearly defines the scope of a project and the terms of their agreement with a client.
Every month in my column Ask UXmatters, our expert panel answers readers’ questions about a variety of user experience matters. To receive their answers to your question in an upcoming edition of Ask UXmatters, please send your question to: [email protected].
The following experts have contributed answers to this edition of Ask UXmatters:
Stephen Anderson—Head of Design, Innovation Garage at Capital One
Mark Baldino—Co-Founder at Fuzzy Math
Warren Croce—Lead UX Designer at Staples, Inc.; Principal at Warren Croce Design
Csaba Házi—Co-Founder and UX Expert at Webabstract; author of Seven-Step UX
Adrian Howard—Generalizing Specialist in Agile/UX
Ben Ihnchak—Co-Founder at Fuzzy Math
Cory Lebson—Principal Consultant at Lebsontech; Past President, User Experience Professionals’ Association (UXPA); author of The UX Careers Handbook
Baruch Sachs—Senior Director, User Experience, at Pegasystems; UXmatters columnist
Amanda Stockwell—President and Principal Consultant, Stockwell Strategy
Q: Is it a good idea to offer fixed-duration or fixed-price UX design services? My clients are asking whether I can provide flat-rate UX design services to them similar to those they experience in other market domains.—from a UXmatters reader
“The answer likely depends on what services you provide and what sorts of relationships you have with your clients,” replies Amanda. “However, I always charge a fixed price for services when I can, I find it easier for my clients and more profitable for myself. The key is to understand what problems my clients are trying to solve, then base my pricing on what the solution will be worth to them. I always try my best not to sell specific deliverables or methods. This gives me flexibility and helps my clients to see the value before they invest.
“For instance, I might have a client who knows their onboarding process is confusing and wants me to fix it. I wouldn’t sell them a usability test of the existing flow, workflow diagrams, and wireframes of a new flow, then usability testing and refinement of a new flow. While I’ll probably end up doing all those things, what I sell to them is a promise to increase the number of people who get through the workflow successfully.
“Fixed-price projects require more up-front involvement and time investment from both you and the client, and that’s not always easy to do,” continues Amanda. “But, because most of my clients are people I’ve worked with before who already trust me to some degree, that makes things a bit easier. You can use this time early in the project to build trust and rapport if you don’t already have that. Occasionally, you may be able to charge for this discovery time. But I don’t usually do this because I find that I can charge more for the overall project if I provide this up-front work. Plus, the time I invest in understanding the client’s problems helps me to be more successful, which ultimately leads to more work.
“When you charge an hourly rate, clients may view you more as producer of a commodity or a part-time resource rather than as a true partner. For the strategy work I do, it’s important that clients value my perspective and for us to work together collaboratively rather than for them to see me as an extra set of hands.”
“UX design is a little different from other design domains, given that user research and usability testing are important parts of the process, and there’s always the possibility that the feedback you gain may shift what you originally expected to do,” answers Ben. “You might provide a fixed-cost, initial discovery phase that would allow much better scoping of the design work.”
Value-Based Versus Time-Based Pricing
“If you’re offering your client a fixed fee based on your value—as opposed to your time—then, by all means, set a fixed price,” answers Warren. “However, if you offer a fixed fee that you’ve based purely on your time, you are essentially saying: what I do is commoditized, so go ahead and shop around for a better price. This is a race to the bottom. If you live in the United States, you will not be able to compete on cost with Bulgaria or India. I suggest that you instead price your services based on the value of your work to your client. Of course, doing this requires some preliminary discussions to ascertain what the client needs. I highly recommend your reading Mike McDerment and Donald Cowper’s Breaking the Time Barrier, a free ebook from Freshbooks. It will help you to understand the differences between charging for value or your time. To quote from the book: ‘I’m not a collection of hours, … I’m the accumulation of all my skills and talents. … I’ve stopped seeing myself as a punch card. My clients don’t see me that way either.’”
“Of course, it’s a good idea to provide value to your customers in whatever way they’re willing to pay for it!” exclaims Adrian. “However, you may want to question whether clients who are looking for commodity services and pricing are going to be your best clients in the long term because they’re selecting a designer based on the price of the services rather than the value the designer will deliver.
“To avoid presenting your services as commodities, you need to look for ways to start selling the value you provide. This means going outside your comfort zone as a UX designer and spending more time in the business development, sales, and marketing domains. Don’t worry. It’s not that scary. You can actually use a lot of your user-research skills to help you win business. One dumb trick I’ve found to be really useful in better understanding the value you provide to your clients is—maybe surprisingly—raising your rates. The amount your clients are willing to pay you is a very rough guide to the value they expect to receive from you.
“The clients to whom you provide lots of value generally won’t complain because they already value you,” continues Adrian. “Pay attention to them. View your work for these clients as a user-research project. Figure out what makes those clients who value you different from those who view UX design as a commodity. Why do those clients value you more? Find more clients who are like them because they’ll get the most value from your services. The clients who complain the most probably aren’t seeing the value you provide. Pay lots of attention to them, too. Again, view understanding them as a user-research project from which you can learn about the barriers to their perceiving your value. Are you miscommunicating your value? Then, fix that. Are you not actually providing value? Either fix that or politely disengage. Everybody happy? Consider raising your rates again. Going through these cycles has given me an amazing amount of learning about how to present what I do and the value it provides.”
Some Risks of Fixed-Price UX Design
“Given the nature of UX design work, fixed pricing can be risky,” responds Stephen. “Unlike other disciplines, for which there are repeatable solutions to familiar problems, good UX design is usually more about bringing clarity to ambiguous or uncertain situations. Therefore, offering fixed pricing—or, more accurately, offering value pricing for a solution to a problem—can be very risky if the problem balloons into something bigger than you anticipated. On the other hand, fixed pricing can be a win-win for client and designer if you both place the proper value on the work you do. And, if solving the problem turns out to be easier than you expected—this is rarely the case!—you’ll come out ahead, and the client will be happy because you’ve completed the work for an agreed-upon price.
“Unfortunately, as a UX designer, you bear all of the risk when problems snowball into something that requires much more time and effort than you initially anticipated—and this happens a lot! I’ve seen some freelance Web designers manage this risk by writing contracts that specify, for example, a maximum of three solutions and only a certain number of iterations. However, I have issues with this approach because it doesn’t align well with the problem-solving—and problem-framing—nature of UX design.
“You could try offering more of an à la carte menu of options for different types of services, but this shifts the focus of an engagement toward activities and away from outcomes,” continues Stephen. “An argument in favor of fixed prices might be that they allow you enough space to solve the problem—something hourly rates might hinder. But accurately estimating the time a project would take—and, thus, making sure you don’t end up underwater—requires plenty of experience working on similar projects.
“I actually prefer a monthly retainer model, so projects are less about scoping and estimating what can often be ambiguous problems and more about working together for as long as the problem demands. This approach assumes there’s agreement that continued exploration and clarification is valuable. What model is right for you essentially boils down to your working style—and how much ambiguity there is around a project.”
“Fixed pricing is an easier sell to potential clients, but it comes with risks,” replies Mark. “You’re forced to be more systematic about how you allocate your time and energy, and you have to be very efficient in delivering the services you’re providing. Offering a time-and-materials contract may seem risky to a client, but it gives you more flexibility to solve a problem in your own way. To assuage any concerns a client might have, you can estimate the hours of work and offer them an estimated price, associating a cost with your exceeding a price cap, if it ever gets to that point. Collaborating in this way not only suits your client’s needs, but is better for your business.”
How Well Do You Know Your Client’s Project?
“The right pricing model depends on how confident you are that you know exactly what your client wants you to do,” answers Cory. “My contracts are a mix of fixed-price and hourly pricing. In either case, I figure out how many hours a project is going to take and add a buffer—increasing the number of hours slightly to cover unexpected, but relatively minor hiccups. If I’m pretty confident that I know exactly what a project entails, I’ll use whichever pricing arrangement the client prefers. However, if the details of the project remain fuzzy, I’ll let the client know what I expect the hours to be, but tell them I’d feel comfortable only with an hourly contract because of the vagueness inherent in the client’s request.
“Often, with hourly contracts, I have some time left over that the client doesn’t use. In this case, the client pays less than the maximum that the contract specified. On the other hand, if things change along the way or the project takes some unexpected turns, it becomes easier to agree that a project will require additional billable hours.
“While it’s always good to have a contract that specifies even the minor details of what you’ll be doing, especially when I have a fixed-price contract, I make sure that the contract very tightly scopes out what the client expects, so if any assumptions change, the client will understand why a change order is necessary.”
Common Pitfalls of Fixed-Price Services
“Both flat-rate and hourly pricing models have their pros and cons,” replies Csaba. “Going with a fixed-price UX project is not a bad approach at all. You have to set expectations, agree on deliverables, and define a precise scope and timeframe for the project. These are all good things. However, early in a project when you don't have enough information, it can be challenging to guesstimate how much time you’ll spend creating the designs—both wireframes and visual designs. For fixed-priced projects, be very clear and explicit about what you’ll do for how much money and in what timeframe. The following are some common pitfalls of fixed-price services:
unclear project scope—Your client might continually change the project brief—for example, adding more and more screens or extra rounds of testing.
unclear or irrational timeframes—When you are discussing a project with a client and creating a quote, it is all too easy to be overly flexible about the timing because you want to seal the deal. But pay strict attention to the timeframe you’re defining, and always allow extra time for unplanned occurrences—such as what happens if the recruitment of research participants takes twice as much time or you need more time to refine your designs. From the client’s perspective, you have to be flexible. It’s very frustrating to a client if you mess up on timing or charge extra for everything that comes up during the design process. In other words, do your time and pricing estimates correctly.
“A lot of clients would refuse to work with you on an hourly basis because they won’t know how much time or money it will take to design their product. In some cases, starting with a well-defined, fixed-price project is the way to go. Once your client gets to know you and loves working with you, you can shift to charging them an hourly rate. As an entrepreneur, charging an hourly rate might be tempting because it reduces your risk. But it also becomes more difficult to scale up because it’s always hard to increase your hourly rate with an existing client.”
Creating a Statement of Work
“In general, yes, you can offer fixed-price design services,” replies Baruch. “However, there need to be parameters. If you know the industry or type of work very well, you can reasonably put together a fixed-price engagement that provides you with the proper margin you need to run your business, while at the same time providing what your client needs. You should prepare a rock-solid Statement of Work (SOW) agreement that clearly outlines what the fixed-price engagement provides, what the customer gets in return, and what happens if the client comes back with change requests. You need to define all of this up front, not during the engagement. Fixed-price engagements can be a good thing—and may actually lead to more work than time-and-materials (T&M) engagements, where a client may feel nickel-and-dimed and you spend a ton of time justifying your invoices. Speaking of invoicing, make sure you get the client to pay some percentage up front, then more for key deliverables. This is also part of setting good parameters.”
Dr. Janet M. Six helps companies design easier-to-use products within their financial, time, and technical constraints. For her research in information visualization, Janet was awarded the University of Texas at Dallas Jonsson School of Engineering Computer Science Dissertation of the Year Award. She was also awarded the prestigious IEEE Dallas Section 2003 Outstanding Young Engineer Award. Her work has appeared in the Journal of Graph Algorithms and Applications and the Kluwer International Series in Engineering and Computer Science. The proceedings of conferences on Graph Drawing, Information Visualization, and Algorithm Engineering and Experiments have also included the results of her research. Read More