If your ministry is considering a new initiative or product, one of the first questions you’ll ask any potential development partner is, “How much is this going to cost?”
The answer is: It depends.
Think about product pricing the way you might budget for a vacation. If you only ask how much a vacation costs, you won’t get a valid answer because the answers are endless. You have to ask clarifying questions.
Where are you going? Overseas or within your own country or state? Traveling by plane, car, boat, or train? What kind of accommodations are you looking for? A luxury resort, roadside motel, or a campground?
Pricing in the product development industry demands a similar level of inquiry to arrive at a more accurate cost estimate. Do you need a mobile app or a responsive website that works on a phone? Do you want to make it easier for existing donors to contribute or tap a new source of contributions? Do you want to spread the gospel or give your members a new platform to communicate?
We know you have budget constraints, boards to answer to, and constituents to serve.
Agathon’s approach to pricing is to be as transparent as possible to help you overcome any fear, anxiety, or doubt you might have about the cost of a new development project.
Let’s examine the considerations that go into determining the cost of a product development project and help dispel some of the confusion and fear that can go along with it.
Accurate Product Pricing Requires a Deeper Discussion
Conversations around pricing come up in almost every introductory call with clients. “We won’t hold you to this, but how about a ballpark price?” they often ask.
Even if we could offer a ballpark price, that’s still just throwing darts at a board. Other companies in the product development sector will often provide an estimate, but that amount frequently balloons, breeding distrust between developers and their clients.
If we can continue the conversation in a constructive way, we can arrive at a price that genuinely reflects the goal of the project and the scope involved: What are we building, by when, and for whom? Do we know what we don’t know? We work to figure it out together before hitting on a cost.
How Product Pricing is Different From Other Industries
To understand the pricing process, you have to appreciate how product development differs from other services and industries.
We had a leaky toilet seal recently, so we called a plumber. He gave us a quote on the spot, did the work, and charged us the price he gave us. How did he know what it would cost for that repair? Because he’s done the exact same thing a thousand times and knows precisely the cost of parts and labor.
Our work is never as straightforward, repeatable, or predictable. Every build is different, with its own set of challenges and complexities. There are no off-the-shelf, plug-and-play solutions with standard prices to match.
Pricing a web or mobile app isn’t like ordering from a set menu. If this were a cookie-cutter business, then perhaps. But that’s not what you’re looking for. Instead, you need something that moves the needle, and that requires doing things that are not the same as what everyone else has done.
We’re building custom solutions designed to address specific problems for a targeted audience. That level of complexity demands a more rigorous approach to pricing. Before we can put a price tag on anything, we need to know what we’re building. And that requires Discovery, which we’ll discuss more deeply in the next section.
Discovery Process Helps Set Price and Determine Direction
Because product development is not one size fits all, we have to use a process to reach a price. We call that process Discovery. The terminology may change from company to company, but Discovery is essentially a discussion that helps determine what is being built for whom and by when.
That process starts by getting the right people in the room. We gather those who are invested in the outcome, those who have ideas and insights to contribute. And we figure it out together.
Discovery also helps uncover what a client truly needs. Frequently a client will come to us with something specific in mind. But in the course of Discovery, we might find that what they actually need is something quite different than what they initially thought. Sometimes that’s a smaller solution. Sometimes it’s something more involved.
Either way, Discovery provides us with a roadmap that helps us reach consensus on what needs to be built and allows us to offer a cost estimate.
What Factors Influence a Final Product Pricing Estimate?
With our Discovery process complete, we now have a more holistic understanding of what our client needs.
But even then we need to determine how a price for that work should be set. Product developers typically use one of two pricing models:
- Map out the project requirements, then put time/effort estimates on each, accounting for quality assurance testing, project management, meetings, etc.
- Set a budget and define the project to fit within that budgeted amount.
In our experience, the most successful approach blends the two models above:
- Prioritize the requirements for the product’s first release as in #1.
- Determine how far we can get through those initial requirements within the budget constraints as in #2.
This approach requires a lot of communication and adjustments along the way to ensure we’re investing time on aspects of the product that matter most. It also creates greater transparency throughout the process.
3 Essential Elements of Accurate Product Pricing
Once we’ve settled on a pricing model, we will take a closer look at each of the factors that will go into an estimate:
- Setting priorities. In almost all cases, a client will come to us with a fixed budget. So we focus on what’s important first. What can we do to get a product to launch and then layer on additional features in response to user needs? We do that within the budget constraints. By delivering the most important features first, you’re in a good spot. And if additional budget becomes available, we can continue to iterate upon and improve that product.
- Identifying deliverables. This is about knowing exactly what is being built. The price of a website will be different from the price of a mobile app. The price of a communication platform will differ from one used to collect offerings.
- Costs after launch. This isn’t about cost overruns or a bad estimate. The reality of product development is that we come up with new ideas along the way… as we should! The energy around product development sparks unexpected but fantastic insights that we capture for consideration after the initial launch. As a rule of thumb, it’s good to set aside 30 percent of a budget for post-launch development.
Don’t Let Uncertainty Over Product Pricing Prevent Your Ministry From Moving Forward
We get it. You’re worried you can’t afford it, the budget won’t be approved, or you’ll hear one number and find out later it costs a lot more.
Big money and big budgets can make people anxious. There’s a lot on the line for you and your organization when there are so many dollars at stake.
But we will work with you to make sure every dollar spent gets you results, and that those results are worth the investment. We’re here when you want to talk.