How to Leverage Earning Potential in Gig Pricing Model
An increasing number of professionals are jumping onto the gig wagon. Some do it to supplement their existing income. Some do it as independent freelancers. Some are just testing the waters before they can decide between full-time employment and freelancing. Regardless of your intention to be part of the gig economy, the burning question is how to effectively price the service you offer. Finding the best gig pricing model for you is a determining factor for a long and successful gig career.
You may think it is easy to arrive at a gig price by comparing salaries for full-time employment for similar work. However, deciding a price for the work you do as a freelancer can be challenging. It also must be dynamic so it can be increased during peak periods and reduced during leaner periods. The bottom line is that a freelancer must be able to optimize earnings according to market needs.
Gig Pricing Model and its importance
Pricing is an essential part of any gig. Arriving at the right pricing is vital for any gig worker. It is especially important in the early part of a freelancing career.
If pricing is too low and you will end up undervalued for the work you do. If it’s too high and you may end up losing potential clients forever. Many freelancers end up doing guesswork. This leads to incorrect pricing. Hence it is vital to know about different Gig Pricing Models. Armed with this knowledge it is easy to decide which pricing model works best for you and the kind of work you do.
Factors Affecting Gig Pricing Model
The first thing to understand is that the gig pricing model is not just a price to be shared with a client. It is essentially the value you will provide to the client, the kind of work you do, and how you esteem yourself and your work. As pricing is a reflection of these principles, it is essential to work out a pricing strategy that justifies them.
Secondly, your gig pricing model must define your personality and work. If you are known to deliver premium results, the price must be premium too. At the same time, if there is little or no effort required to complete the gig, pricing must be relatively lower.
Another factor to consider is whether your pricing will support your lifestyle. A gig pricing model must also consider your experience, expertise with certain gigs, time spent in communicating, time spent in executing the gig, any ad-hoc charges like administration charges and processing fees, and taxes to be paid.
Factors like the quality of work, the speed expected from you, and the complexity of the gig. These elements affect the deliverables, and the pricing must be quoted accordingly.
As a gig worker, you must be aware of how other freelancers working in the same niche as you find the gig. If it is an easy one for them, pricing must be low and vice versa.
Different Strategies for Gig Pricing Model
Let us look at some strategies for an effective gig pricing model. There is no rule that you must stick to one strategy. Different strategies can be used for different clients. As you learn the ropes of gig working, you will learn which strategies work best for the kind of gigs you work on and the type of clients you work with.
Hourly Rate Strategy
This is the most commonly used strategy. The pricing is based on the number of hours spent doing the gig. Essentially, the trading element is time for money. Earning goes up when more time is spent.
For example, if a particular gig demands an hourly rate of Rs.500. If the deadline to complete the gig is 5 days of 6 hours each. The total price works to Rs. 15,000/-. It is similar to calculating wages in a regular employment setup.
Freelancers use this very often, and clients are comfortable with this setup. It is best suited for loosely defined projects and when the amount of work may change as the project progresses. One disadvantage is limited earning potential as you have limited hours of work per week, month, or year. It is important to keep track of hours spent, as working too fast or too slow may hamper your earnings.
Daily Rate Strategy
This strategy is favoured by large companies that hire freelancers. The pricing is based on charges for a day’s work which may range between 6 hours to 8 hours. The client is only concerned with the work completed in a day.
For example, if a gig has an agreed pricing of Rs 750 per day against a specified amount of work, the gig worker gets paid according to the agreement.
This strategy is good for clients who expect the completion of tasks in a day. It is simple for them to calculate the daily payments as well as the overall project cost. The disadvantage for a gig worker is the limitation in yearly earnings as there is a limit of 365 days in a year.
Weekly Rate Strategy
This strategy is also a time-bound strategy. It is based on the premise that you will work on the project weekly with 35 to 40 hours assigned per week. Freelancers who choose this strategy sometimes split the week for more than one client. The agreement with the client in such cases specifies the hours per week.
For example, the project demands 2 weeks (35 hours) of work with an agreed pricing of Rs. 3000/- per week. The total earning for the gig worker is Rs. 6000/-. Even if the freelancer meets the deadline by working 20 hours per week, the final payment remains the same.
The advantage here is that the pay calculation is simple. The clients usually analyze the progress on a weekly basis and do not consider the actual hours spent. The rates can be increased if the time involved is higher. This works best for long-term projects. The disadvantage is earning limitation as a year has only 52 weeks. Another disadvantage is client disappointment if the project is not completed in specified weeks.
Monthly Retainer Strategy
Here, the client pays a fixed amount per month and retains the freelancers for a month. Clients often use this method when they need freelancers who have a high level of expertise in certain gigs and are not sure when the service will be needed during the month. They usually pay upfront to book the availability of the gig worker.
For example, a client may retain the services of an expert freelancer for 2 months at 10000 INR per month. They may pay 20000 INR upfront to the freelancer. In return, they may expect devoted availability from the freelancer for their tasks for the agreed two months. At the end of the contracted period, the client may choose to extend the contract for more months as necessary.
The advantage for the freelancer is the income is predictable and usually before the contract period begins. However, very few freelancers achieve the kind of reputation for companies to consider retaining their availability.
Value-based Strategy
This pricing is based purely on the value offered to the clients and their projects.
An example of this pricing is when a freelancer is hired by a client for a project that will be sold at a high price. Suppose the agreed price for the gig is Rs. 40,000. Both the freelancer and client are aware that the eventual value could be around Rs. 45,000 or thereabouts. It’s a win-win for both the freelancer and the client since they understand that they are paying for the value of the write-up.
This strategy works best in creative fields like writing, designing, and composing. The earning potential is high. The volatile nature of the projects can be a disadvantage for this pricing strategy.
Fixed Fee Strategy
The pricing is fixed for a certain gig. The freelancer calculates the time and effort it takes to complete the gig. This is an excellent strategy for freelancers as it eliminates any time factors that may hamper earnings. It is ideal for clients too, as the rate is fixed, eliminating all worries about time calculations.
An example is when the freelancer takes up the project, understands its complexities, calculates the time required, and the efforts needed. Based on these factors an agreement of payment of $5000 on completion of the project. The client pays the amount when the project is completed.
In this strategy, the freelancer must be aware of the market pricing as well as their expertise and limitations. The pricing must be competitive and at the same time lucrative for the gig worker.
Conclusion
Most new freelancers ask which gig pricing model strategy works best. Each has advantages and limitations. Each works best for certain kinds of gigs. Each suits certain clients. You must devise strategies that work in your favour depending on jobs and clients. Gig4U offers freelancers an amazing platform with a vast variety of gigs. As you gain experience, you will learn about the application of gig pricing models.
Originally published at https://gig4u.co on July 13, 2023.
