The Complete List of 15 Pricing Models for Services PLUS Guidance on the Perfect Pricing Model for You
Want to know which pricing models for services you could use for your business? I’m sharing the complete list plus the pros and cons of each so that you will create the perfect pricing model for your services and maximise your income.
You want to provide your clients with the best value for their money, but if you’re anything like me, you want to ensure you have the right pricing models for services in place so you actually earn what you deserve. As a lawyer myself who drafts contracts for service-based entrepreneurs like you with all kinds of pricing models, I am telling you exactly which pricing models for services exist and which ones will work best for your offerings.
You will learn everything you need to know about all the different pricing models for services, incuding pricing models examples, so that you’ll know which types of pricing models work for you.
After learning about all the pricing models for services, you’ll set the right pricing mechanism in place for your services to maximise your income!
This post is all about the complete list of pricing models for services that will help you choose the best one for your services and maximise your income.
Ultimate Pricing Models for Services
The full list of all the main types of pricing models
1. Hourly Pricing
Let’s start with the most traditional one of all the pricing models for services. With this pricing model, you charge your clients based on the time you spend on the service.
Positives
This is a great pricing model if:
you provide services to a client of which it is unknown how much time will be spent on the service, or
it’s a long-term client relationship or project. You’re not providing a short one-off service.
You also don’t have to worry about spending way more time on the project than anticipated, like in the case of fixed pricing (which we’ll get to next), so you don’t run the risk of losing money (in the sense that you are spending way more time that you should be paid for).
Negatives
However, it really depends on the client if this is the right fit.
First of all, you might be dealing with a new client with bad intentions. That client may suddenly ghost you once you have delivered to the client what they want when you have spent 20 hours or more on this project. Let’s say your hourly rate is $50 an hour. That’s $1,000 and half a week of work you just lost! You could start a legal proceeding. But let’s be real. It’s probably not worth the legal costs of suing someone over $1,000, especially if the client is located in a different country. And this is coming from a lawyer. But I have to be real with you. Depending on your financial position, losing $1,000 might not be the end of the world to you, but it sure hurts!
But this is the worst-case scenario. Let’s say the client does not ghost you, but the client disputes whether you have actually made the number of hours you claim to have made. Then, you’ll be spending extra time laying out your timesheets and (respectfully) arguing that, yes, you have made those hours. It’s a nightmare situation to be in, and it ends up costing you a lot of unpaid time just to get paid what you deserve.
But I definitely do not want to discourage you from choosing hourly pricing. In certain niches and circumstances, this is simply the best option, like in many types of freelance and consultancy work. You just need to work with clients you trust and who trust you.
If you are working for new clients, I highly recommend using a service like Upwork. It does a lot of the work for you, like verifying potential clients’ identities and payments, and it has great tools to track your time. It’s a safer solution in many cases.
The downside is that, of course, it takes a percentage of your pay.
So, if you’re working with clients long-term who you know will pay you and won’t question your hours, I recommend using a freelance agreement.
If you’re looking for a freelance agreement, I provide a freelancer-friendly freelance agreement template, which you can find on this page of my contract shop.
My template contains all the protections and boundaries you need and two types of pricing models for services to choose from (1) the hourly pricing model and (2) the retainer pricing model.
2. Retainer Pricing
That brings me to the next one of the main pricing models for services: retainer pricing. This model allows you to charge a fixed fee on a periodic basis, like weekly or monthly.
Positives
A retainer pricing model is a great option if you have a long-term commitment to a client and know you will work a set number of hours per week or month.
It’s also a safer option than the hourly pricing model, as you can charge this fee upfront. My freelancer-friendly freelance agreement allows you to charge the retainer fee prior to a given week or month. It also contains the proper rights and protections so that if the client does not pay you (on time), you can suspend your services until the client pays you. So, you don’t run the risk of not getting paid for the work you’ve already done for your client (as is the case with the hourly pricing model).
It also provides stability for you and your client. This model can work great for certain consulting, advisory, and legal services, as well as marketing agencies.
Negatives
However, the retainer fee can only be used for long-term commitments, for which you know the hours will not fluctuate much.
The negative side of that is that you are capping your revenue, and you run the risk of working a little bit more without actually getting paid for that overtime. My freelancer-friendly freelance agreement allows you to charge more for additional hours. However, in reality, you won’t actually charge for a little bit of extra time unless you’re great with admin.
3. Flat Rate Pricing
The next one of the main pricing models for services is flat rate pricing. Just like in the case of retainer pricing, you charge your client a fixed fee, except this is a one-time payment (as opposed to retainer pricing, which is a recurring periodic payment).
Positives
This is a great option for short-term, one-off projects, like creating a website or logo for a client. You usually know how much time you’ll spend on these types of services, so you will likely not get underpaid (in most cases).
Also, in this case, you can charge the full or at least part of the fee upfront so that you don’t run the risk of not getting paid for your services. You can choose to be paid in full upfront or parts based on milestones.
Negatives
The negative side to this one of the pricing models for services is that a certain type of highly demanding client will take full advantage of this. You run the risk of this client asking for way more, which costs you a lot more time. That is if you do not have an airtight contract in place that specifically outlines every single little task that is included in your services and what is not included in your services.
That is why you’ll see in each of my service agreements, which include a flat-rate pricing model, that each task is granularly defined and listed in a transparent overview. The agreement will also include a specific list of tasks not included. Plus, my templates allow you to charge an additional fee for extra services. That is the case with my 1-on-1 coaching agreement, content creator agreement, and brand sponsorship agreement, to name a few.
Additional types of pricing strategies
We have now discussed the 3 main types of pricing models for services.
Now, let’s get into the other 14 pricing models for services that you can add to your main pricing model.
4. Bundle Pricing
When you’re offering your services at a flat rate, you can also opt for bundle pricing. If there are certain services that your clients will usually want together with another service, this is a great way to upsell your services!
For example, you could offer an entire branding kit if you are a graphic designer.
The same precautions apply here, as I just discussed for the flat rate pricing. So ensure you have a solid contract with clear boundaries!
5. Subscription Pricing
Another great one of the pricing models for services is subscription pricing. For certain services, this one can be a real money-maker.
This is where you can ask for a subscription fee for certain ongoing services payable over a recurring period, usually monthly.
This can work great for certain maintenance services, like IT services, coaching services, accounting services, certain legal services, but also other advisory services. They need to be services that provide continuous value to clients.
I think a lot of entrepreneurs are afraid of being called by clients all day, every day, and at the beginning of each client’s subscription, you will likely spend more time with them. But, as time goes on, you will likely find that you do not spend that much time on your clients at all, and you’re still collecting a fixed monthly income! Of course, this totally depends on your services and the subscription package you offer.
6. Tiered Pricing
Another one of the pricing models for services you can combine with a flat rate pricing model is tiered pricing.
You can offer a base service and then offer other upgraded packages for that same service at higher fees.
For example, if you offer to create websites, you can offer the following packaged with this tiered pricing model:
A basic website with certain standard features as a base price.
A more professional website with a webshop included.
A deluxe version with additional features like a special gated area for course subscriptions.
7. Premium Pricing
That brings me to the next pricing model for services: premium pricing. Depending on your level of expertise and your special way of providing services, you can opt for the premium pricing model, which means that you ask for a higher fee than the average service provider in your niche. This works well for certain luxury or high-quality services, like high-end interior design services.
If you are in high demand but cannot actually service all that demand, premium pricing might be the way to go!
However, you must be sure that you do not set your prices too high, as not enough clients will want to work with you. The last thing you want to resort to is price skimming. That’s when you have to (gradually) lower your prices to meet the sweet spot between demand and supply. Not a good look. It’s the opposite of penetration pricing.
8. Penetration Pricing
As I just mentioned, one of the pricing models for services you can use when you are just starting out or launching a new service is penetration pricing. Penetration pricing means that you initially set your price low to gain clients rapidly.
It can be a great strategy if you’re just starting out. The downside to putting your prices too low is that it may signal low quality.
9. Free Trial Pricing
Another one of the pricing models for services that you may want to try when you’re just starting out is free trial pricing. If you’re a new coach, for example, and you have no previous experience professionally coaching clients, this might be a good option for you. It’s kind of like a freemium deal. You offer your service for free for a period. You are trying out your new coaching program with ‘beta’ clients. All you ask in return is that they give you a testimonial that you can publish on your website or social media to gain real, paying clients. Once that period is over, you can start charging those ‘beta’ clients if they want to continue.
10. Economy Pricing
Another one of the pricing models for services that are often used in more saturated niches is economy pricing. Economy pricing means that you offer your services at low prices to attract budget-conscious customers. It’s basically what I am doing. I offer my services at a way lower rate than other lawyers in my niche with my experience, as I want to make high-quality legal services accessible to entrepreneurs and creators of all sizes. If you do it right, it can also be very profitable. However, if you don’t do it right, you run the risk of your services being perceived as low quality. Communication is key here.
11. Competitive Pricing
One of the pricing models for services that is right in the middle of economy pricing and premium pricing is competitive pricing. With the competitive pricing model, you are setting the prices for your services in line with the services of your competitors. It’s another pricing strategy that works in saturated markets with similar services.
12. Dynamic Pricing
Dynamic pricing is one of the pricing models for services that is kind of like competitive pricing but takes all factors into account. With dynamic pricing, you’re adjusting your prices based on the (changes in the) prices of your competitors but also real-time market demand or your client’s behaviour.
It’s a strategy that maximises your revenue potential. However, the downside of applying this strategy too often is that it leads to distrust among your clients. “Why did I have to pay a higher price last month?” is what you might get.
13. Price Leadership
If you are a dominant player in your field, the price leadership is one of the pricing models for services that will work for you. With price leadership, you are setting the prices and others in your field will follow. You are in a place of power where you get to establish the market standards. It’s a great place to be.
14. Psychology Pricing
Psychology pricing is one of the pricing models for services that most of us like to use. Maybe you haven’t heard of the term, but you see it everywhere: prices that end in specific digits to influence perception to make it seem like less than it is. $199 looks a lot better than $200, even though we’re basically talking about the same price. We know it is, but it just feels better.
15. Geographic Pricing
The last one of the pricing models for services I’ll discuss is the geographic pricing model. As the term already says, you charge clients a different price based on their location. You could be charging clients in the US a different price, for example, than in Bulgaria, as an average US client will usually pay a higher price than someone in Bulgaria for certain services. However, with the globalisation of services and pricing information being accessible from anywhere in the world, this has become a less popular method. People are likely to find out that you might be offering your services at a different price to someone else and consider it unfair. Also, there are some legal considerations to keep in mind. Within the European Union, offering the same service at different prices in countries within the EU is considered price discrimination, which is not allowed.
Services agreements with the perfect pricing strategy for your niche
Are you looking for the perfect contract template for your service in your specific niche?
I have created contract templates with curated pricing models for services in specific niches, such as social media management agreements, digital marketing agreements, coaching agreements, photography agreements, creator agreements, and more!
Find the contract template that suits your services in my contract shop!
This post was about the complete list of pricing models for services to find the best one that works for you and boosts your revenue.
Want to know how to set boundaries with clients to protect your boundaries and money? Read Part 1 for setting boundaries with clients in this blog post on the 5 Out of 10 Practical Clauses to Set Crucial Boundaries with Clients (Part 1).
Read about the 5 other vital clauses for setting boundaries with clients in this blog post on the 5 Out of 10 Crucial Clauses for Setting Boundaries with Clients (Part 2).
Do you want a contract that includes the best pricing models for services for your specific niche? I sell contract templates for your specific services in my contract shop!
