Have you ever heard the story about the 'Dumbest Kid in the World'? If you haven't, we think you should, as it is short and applicable to daily life. We liked it a lot and it goes like this:
Titled: Dumbest Kid in the World
A young boy enters a local towns barber shop and the barber whispers to his quite important customer, “This is the dumbest kid in the world. Watch while I prove it to you.”
The barber puts a ten dollar bill in one hand and two one dollar coins in the other, then calls the boy over and asks, “Which do you want, son?”
The boy takes the two coins and leaves.
“What did I tell you?” said the amused barber. “That kid never learns!”
Later, when the customer leaves, he sees the same young boy coming out of the ice cream store.
“Hey, son! May I ask you a question? Why did you take the two coins instead of the ten dollar bill?”
The boy licked his cone and replied, “Because the day I take the bill, the game is over!”
This story, often circulated as a humorous anecdote or parable, highlights the theme of underestimation and cleverness in an unexpected form. The boy, labeled as "the dumbest kid in the world" by the barber, actually demonstrates a form of shrewd intelligence and long-term thinking that the adults around him fail to recognize. By choosing the two coins over the ten dollar bill, he ensures the continuation of the barber's game, thereby gaining more money over time than if he had chosen the ten dollar bill.
The moral of the story could be seen as a reminder not to underestimate others based on first impressions or superficial judgments. It also playfully suggests that what might seem like a simple or foolish choice on the surface could be the result of a deeper, more strategic form of reasoning. This story challenges the listener or reader to consider the value of perspective and to recognize that intelligence and wisdom can manifest in unexpected ways.
But what happens?
What happens if this anecdote applies to a 'just another story' of sustainable goodwill to support burgeoning enterprise?
Once upon a time we embarked on a journey with a client to create a website unlike any other. This wasn't just any website; it was a masterpiece that allowed the client to not only manage and sell their performance courses with unparalleled ease but also to manage student details intricately, including sophisticated email automations. The website was a catalyst for growth, transforming the client's business and causing their online sales to skyrocket in two years by 200%.
For two years, we charged this client a minimal fee, a gesture of goodwill to support their burgeoning enterprise. However, as their success soared, we realized it was time to adjust our pricing to reflect the regular agency fee for our comprehensive services. When we presented this new fee structure, the client balked. They failed to see the immense value we provided and refused to acknowledge how our work had been a cornerstone of their growth. They dismissed our contributions as insignificant, unwilling to compensate us fairly for the continuous benefits they received.
Left with no choice, we decided to end the era of underpricing our services for this client. We timely informed the client and introduced a premium fee that accurately reflected the quality and depth of our work.
This decision marked the end of the "cheap game," transitioning our relationship with the client to one that recognized the potential and true worth of our services.
Just like the boy in the story who wisely chose the two coins over the ten dollar bill, we too had played a longer game, providing value far beyond the immediate gains.
But the moment had come to ensure our efforts were properly valued, teaching a valuable lesson in recognizing and rewarding true worth and partnership.
Choosing a sustainable pricing model for business success
Charging for web development, design, and business success involves finding a balance that reflects the value provided, supports sustainable growth, and fosters positive client relationships.
There isn't a one-size-fits-all approach, but some methods have proven more effective in achieving these goals:
- Hourly Rate:
This method is typically applied to projects with an ambiguous scope or those anticipated to undergo changes. It guarantees that the agency receives compensation for the entirety of the work executed. However, it's important to note that under this model, the client does not automatically obtain ownership rights to the code produced. This aspect can contribute to cost unpredictability for the client and, if not handled with transparency and clear communication, may potentially strain the client-agency relationship. Apply for a project > - Fixed Price:
This pricing model is ideal for projects that have a clearly defined scope, such as brochure-type websites that don't demand extensive maintenance or small-scale eCommerce stores with a limited product range. It offers clients the assurance of a fixed cost, providing them with budget stability, while encouraging the agency to work efficiently. However, there is a risk for the agency if there's an expansion in project scope beyond the initial agreement without appropriate adjustments or additional compensation. Apply for a project > - Retainer Fee:
A retainer model operates on a monthly or periodic fee structure for continuous services, effectively blending elements of both hourly and fixed-price models. This approach is superb for cultivating long-term partnerships, as it secures a consistent revenue stream for the agency while offering continual support to the client. Under this model, while a base retainer fee is agreed upon for standard services, any additional work requested by the client incurs a percentage increase on the base retainer price. This setup encourages ongoing collaboration and mutual growth, aligning both parties' interests towards sustained success and improvement. Apply for a project > - Value-Based Pricing:
Value-based pricing, where charges are aligned with the potential return on investment (ROI) or the value the project delivers to the client, is reserved exclusively for larger initiatives, specifically those exceeding an initial investment of min $20,000 onwards. This method can be exceptionally rewarding and necessitates a profound comprehension of the client's business, promoting a collaborative partnership stance. However, it demands a significant capacity to measure value accurately and to negotiate terms effectively, ensuring that the pricing reflects the substantial benefits provided to the client. Apply for a project > - Project-Based Pricing with Performance Incentives:
This approach merges fixed pricing with the incorporation of gratuity-based rewards for meeting designated milestones or key performance indicators (KPIs), blending elements of both the value-based model and incentive-driven compensation. By establishing a baseline fee that covers the project scope and augmenting it with bonuses for surpassing specific benchmarks, this strategy harmonizes the agency’s motivations with the aspirations of the client. It emphasizes outcome-oriented collaboration, enhancing the potential for mutual benefits and elevated returns for both entities involved. Apply for a project >
Our most generous digital agency basic plans can be ordered from CONNECT, 2u2 Web Technologies / (see) Digital Marketing & SEO Plans >
How does a digital agency's sustainable billing model compares to payment processing providers?
(this is a part topic, planned to expand in a series)
Comparing a web agency's billing model to how payment processing fees are applied by providers like banks or online payment methods (Stripe, PayPal, Square, Afterpay, ZiP payment, Klarna) offers a nuanced view of financial management and pricing strategy in the digital services sector.
When comparing a web agency's billing model to the way payment processing institutions (like banks or online payment platforms such as Stripe, PayPal, Square, Afterpay, ZiP payment, Klarna) collect their fees, there are indeed similarities in the fundamental approach to generating revenue. Both models are based on providing a service and charging either the businesses or the customers for that service. Apply for a project >
Service Provision and Fee Collection
- Web Agency: Offers web development, design, and digital marketing services. The agency bills for these services based on various models (e.g., fixed, hourly, retainer, or value-based pricing). Each model reflects a strategy to cover the cost of the service provided and includes a profit margin. Apply for a project >
- Payment Processors: Provide transaction processing services, enabling businesses to accept payments from customers via various channels. They charge fees for these services, typically as a percentage of the transaction value plus a fixed fee per transaction.
Revenue Generation Through Service Fees
- Web Agency: Generates revenue by charging clients for the completion of specific tasks or projects, ongoing support, or the value delivered by their services. The fee structure is designed to compensate for the agency's time, expertise, and resources expended on behalf of the client. Apply for a project >
- Payment Processors: Revenue is generated through fees collected on each transaction processed. This fee compensates for the use of the platform's technology, security measures, and the facilitation of electronic payments between buyers and sellers.
Cost and Value Transparency
- Web Agency and Payment Processors: Both aim to provide clear value to their clients or users, with fees structured to reflect the service's worth. Transparency in how fees are calculated and charged is crucial for maintaining trust and ensuring satisfaction.
Adaptation to Client or Market Needs
- Web Agency: Adapts its billing models based on project requirements, client expectations, and market trends. This flexibility allows agencies to tailor their services and pricing to best meet client needs. Apply for a project >
- Payment Processors: While their fee structure is generally fixed, payment processors may offer tiered pricing or discounted rates based on transaction volume, catering to businesses of different sizes and transaction frequencies.
In conclusion, the billing model of a web agency and the fee collection approach of payment processing institutions share a fundamental similarity in that both are predicated on the provision of services and the collection of fees for those services. Each has developed a structured approach to ensure that the services provided are appropriately compensated, reflecting the value delivered to their respective clients or users. This parallel underscores the importance of a well-considered pricing strategy in both sectors to balance revenue generation with customer satisfaction and loyalty.
Our most generous digital agency basic plans can be ordered from CONNECT, 2u2 Web Technologies / (see) Digital Marketing & SEO Plans >