Pricing Dynamics and Scaling Your Business

Evolve your pricing strategy and scale your business without compromising quality. Learn how transitioning from time-based to value-based pricing can boost revenue and client satisfaction, while implementing standardized processes and quality control measures ensures consistent excellence as your team expands.

Pricing in the video industry is complex and constantly evolving due to the proliferation of increased efficiencies through recent advancements in video technology. If you ask different business owners in the video space how their pricing works, they'll all probably give you a different answer. I'm not speaking from experience or anything. They all do what works best for them, but I can definitely tell you that some methods have advantages over others.

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Our journey in refining our pricing strategy is a story of evolution and adaptation, initially and for years to follow. We followed a traditional time-based pricing model, charging based on estimated hours for each phase of the project. Over time, as we improved our offering, we gradually raised our hourly rate as we completed more projects, and we became more accurate with our quotes and hourly estimates.

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Clients found it often helpful to see the transparent and specific breakdown of the work that they would be engaging with. However, this approach, while straightforward, had its drawbacks. It inherently limited our earning potential to the number of available hours we could work. It didn't necessarily directly reflect the value we were providing to our clients. It also had negative implications towards our project management.

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Managing individual hours across tasks, across several projects can be confusing for team members, and when expectations for your scope shifts, it's a straight up nightmare to reconfigure. Lastly, the deep understanding of project flow required to price projects to that level of task specificity, something which we gained over learning every aspect of the production process, proved to not be a scalable practice.

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We're now transitioning to a value-based day-rate pricing model. We still consider time and cost valuation, but place a greater emphasis on the specific value of different areas of focus within project phases. For example, VFX work, which requires much more specialized skills, is priced higher than assistant editing. This method allows us to manage projects more effectively, aligning costs with the unique value each part of the process brings to the project.

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This shift to outcome-based pricing was a strategic move inspired by modern pricing theories. Outcome-based pricing, as discussed in the Journal of Revenue and Pricing Management, focuses on the value delivered to the customer rather than the cost of service. This model aligns with the Harvard Business Review's emphasis on customer centric business models, where the focus is on delivering value to the customer.

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Implementing this new pricing strategy required a deep understanding of the unique value our services brought to our clients. It meant moving away from the traditional mindset of trading time for money, and towards a model that highlighted the outcomes and results of our work. This transition wasn't just a change in how we charged for our services. It was a fundamental shift in how we viewed the value of our work.

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The impact of this new pricing strategy was significant. It allowed us to break free from the constraints of time-based billing and focus more on delivering exceptional value. Our clients appreciated the system as it aligned the cost of our services with the results they achieved. This led to greater client satisfaction and loyalty as they felt they were paying for results, not just time.

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This pricing strategy also had a positive effect on our team's mindset and encouraged us to focus on efficiency and effectiveness, as we were no longer just billing for time, but were being rewarded for the value we provided. This shift in mindset was crucial in driving innovation and efficiency in our processes. The move to outcome-based pricing was a key factor in our businesses growth and success.

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It allowed us to scale our revenue without being limited by the number of hours we could work. It also aligned our business more closely with the evolving needs and expectations of our clients, who were increasingly looking for value driven solutions.

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Ensuring quality while scaling integrated business is challenging, especially when the founders have been integral to the creative process to grow. It's necessary to distill your creative process into teachable methods and implement quality control metrics. Developing standard operating procedures and SOPs for various development stages has been key to maintaining consistency as our team expands. Scaling our business while maintaining the quality of our services presented a unique set of challenges.

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In the creative industry, where the quality of work is highly subjective and directly tied to client satisfaction, maintaining a high standard of quality is crucial. A significant part of scaling is understanding the costs and inputs in the creation process, and adjusting pricing models accordingly. A helpful exercise is to envision how a project or product would be handled if you were not involved in any part of the process, and then scale that process by 10x, 100x, and then a 1000x.

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Predict potential shortcomings and adapt with a customer-centric approach. Our thoughts around scaling with quality was influenced by Total Quality Management principles, or TQM, as advocated by Edwards Deming. TQM is a comprehensive method that involves the entire organization and the pursuit of quality and continuous improvement. This management style was particularly relevant to us as we scaled our team and took on more complex projects to ensure consistent quality.

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We developed standard operating procedures, or SOPs for our creative processes. These SOPs detailed every aspect of our production process, from initial client consultation to final project delivery. This systematization was crucial in ensuring that every team member understood the standards and processes, reducing variability in our service delivery. We also established quality metrics and regular review processes. These metrics provided a quantifiable way to measure the quality of our work and identify areas for improvement.

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Regular reviews ensured that we were consistently meeting our quality standards and allowed us to make adjustments as needed. The implementation of these quality control measures had a profound impact on our business. It allowed us to maintain a high standard of quality even as we expanded our team and took on more projects. This consistency in quality was key to building and maintaining our reputation in the market.

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Another critical aspect of scaling was ensuring that our team understood and embraced our commitment to quality. This involved regular training and development, creating a culture that valued excellence and attention to detail. By involving the entire team in our quality control processes, we fostered a sense of ownership and pride in the work we produced. Scaling with quality also meant being mindful of the costs and inputs in our creation process.

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We continuously evaluated our production costs and adjusted our pricing models accordingly. This ensured that we were not only delivering quality work, but also doing so in a cost effective manner. In conclusion, scaling with quality was not just about maintaining standards. It was about creating a culture that valued excellence and continuous improvement. It involved systematizing our processes, establishing clear metrics, and involving our entire team in the pursuit of quality.

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This approach was key to our ability to scale our business without compromising the high standards that had been the foundation of our success.