Pricing Strategies For Meeting & Event Services

Let’s face it, pricing is one of the biggest challenges companies face, especially in the meetings and events industry.  When providing services, there are so many variables for a service provider to take into consideration.  Pricing simply isn’t one size fits all. Uncontrollable variables and ever-changing scopes make it difficult to ensure profitability.  This aspect of business affects us all, from freelancers, to some of the best meeting management companies and everyone in between.

Those who are procuring services also face challenges.  They manner in which companies want or need to buy can change from company to company, department to department, and even person to person.  Some customers expect full transparency. They want to know how much time you estimate a project will take, what was worked on during that time, and even the margin you are making on a project. Meanwhile, other customers only want to know their bottom line. They’re the ones who only ask, “How much?” They don’t care how you arrived at that number.

To make matters more complicated, pricing for products and services can change based on dates of service, location, and other variables. A single pricing model may not be the best solution because different products and services demand different resources or skillsets.  For instance, meeting management services during the Super Bowl may be more expensive due to  the need for a meeting planner with a higher level of expertise because logistics are more complicated and time consuming, and resources may be limited.

It is beneficial for service providers and customers to understand how different pricing models work.  Having conversations about different pricing models at the RFP or project initiation stage can prevent future roadblocks and help build trusting relationships between all parties. 

One of the best ways to determine effective pricing strategies is to weigh the pros and cons and the risks and returns of the pricing models available to ensure both parties understand the decision they are making.  The amount of risk each party is taking should be taken into consideration when setting pricing. 

For example, when a customer prefers flat fee pricing for a project, the meeting management company is taking on more risk because they don’t know the amount of hours it will take to complete the project.  Because of this, they are likely to overestimate the hours it will take to complete the project in order to mitigate the risk of going over the pre-determined hours and losing profit.  

While pricing is a game of risk, there are ways to set pricing that will ensure that both parties are getting the most out of a contract. Here are a few pricing and profitability models that can help you understand how pricing structures work and which pricing structure is best for you!

1)    COST PLUS

Variable cost-plus pricing is a pricing method in which the selling price is established by adding a markup to the total variable costs. In meetings and events, a common variable cost is the price of food and beverage. With this pricing model, the expectation is that the markup added to the total variable costs will contribute to meeting all or part of the fixed costs and yield some level of profit.

This model is often used by meeting management companies (not necessarily freelancers), who hope to profit from the markup of variable costs associated with an event. The big pro of the Cost Plus method for customers is that they can flex and retract their program spend thus shifting the management fees they are paying.

The cons of this model are that the meeting spend doesn’t always align with the work done in planning the event. With Cost Plus, a company could end up getting paid less if the overall meeting budget decreases. If the customer’s budget increases, a management company might end up paying more.

To better understand this, consider whether a customer should pay more if the planner decides to order Veuve Cliquot instead of house sparkling wine. The premium wine will increase the variable costs and the meeting management company will make 4x the amount even though the time spent on ordering it was the same.

2)    FIXED PRICING

This model charges the client a set price for services offered. For example, a project-based company may charge a client a fixed price of $25,000 to complete a project, regardless of how many hours are expended or how many resources are involved. When determining your fixed price you’ll want to consider the complexity of services and, on average, how much time and resources must be committed to the project.

With this model, the meeting management company or freelancer often take on the larger risk. The pros of this model are that the freelancers know, up front, how much money they will make and the customer knows how much money they will spend.

For this model to be profitable, the scope of the event must be clearly defined. Unfortunately, for many events, you are not completely certain about how the project will unfold before you begin. The biggest drawback of this model for meeting management companies and freelancers is that they may spend a lot more time than they expected on a project. Likewise, a con for companies is that they may spend more money than they need to on a project.

3)    HOURLY PRICING

Hourly pricing is a commonly used pricing model for freelancers. With hourly pricing, a freelancer charges for the time spent working on a project. The hourly rate is agreed upon before the start of a project. This is an effective option for long-term projects, or if both parties are unsure of how many hours the work will take.

The benefit of the hourly pricing model is that it can mitigate risk for freelancers if the scope of work changes based on project needs. The freelancer is paid for all of the time they spend on a project, regardless of unforeseen changes. For organizations, hourly pricing is a great way to monitor spend and gain insight into which portions of a project to give to freelancers.

An hourly pricing model may end up costing companies more than they initially expected due to unknown factors that arise. It can also be difficult for companies to estimate how many hours to allot for a project, especially when a customer and client are just beginning to work together.

One of the best pros of the hourly pricing model is that it fosters regular communication and teamwork, which can help freelancers and organizations develop long-term relationships. Hourly pricing allows more room for flexibility and pivoting within the partnership, unlike fixed pricing, which is less malleable.

WHY SOUNDINGS CONNECT UTILIZES THE HOURLY PRICING MODEL

We believe that hourly pricing is the fairest pricing model for our customers and our freelancers. We encourage teamwork and honest communication and we’ve learned that hourly pricing is the best way to protect both sides. 

The way it works is that our freelancers set their hourly rates. After the client agrees to the rate, the hours are tracked in a time management system. This makes time spent on projects transparent and easily accessible. Our freelancers will submit their hours monthly, or as requested. This system works well because we can regularly monitor the freelancer’s hours and let customers know if we think the project hours will go over.

Pricing is notoriously one of the most difficult business skills to master, but it gets easier when you’re armed with information about your options. Are you a freelancer interested in joining the Soundings Connect network or an organization seeking to partner with an expert freelance event professional?

Contact Soundings Connect to learn more about how our talent innovates events!