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Why Philosophie Uses Team-Based Pricing for Its Corporate Innovation Contracts

by Emerson Taymor

Why Philosophie Uses Team-Based Pricing for Its Corporate Innovation Contracts

Apr 12, 2018

Imagine you’re hiring a nanny to care for your children but your work hours vary from week to week. If you pay for care by the hour, some weeks might be astronomical and others meager, making it nearly impossible for you or your nanny to anticipate costs and earnings. But if you offered a fair, weekly salary, both your households could budget effectively, reduce financial stress, and lay the foundation for a strong working relationship — a real win-win.

Most consulting agencies use the hourly model. They either charge by the hour or offer fixed fees per project. If a project winds up requiring extra work, the client gets a bigger bill. When Philosophie started out, we followed the same formula, first offering fixed-fee and then hourly pricing for projects. But we soon found that neither format made sense for us or our clients. One encourages the least amount of work to be done to achieve payment, while the other made budgeting nearly impossible for both parties. Either way, someone got the short end of the stick.

Looking for a better answer, we experimented with team-based projects priced at a flat weekly rate. This approach allowed us to deploy balanced, cross-disciplinary teams that focus solely on delivering the best experience to our clients. It also simplified budgeting for our customers and streamlined our corporate accounting. Now, virtually all of our contracts are team-based weekly payment arrangements.

Although our pricing is a bit unusual in the agency world, our clients appreciate it for three main reasons:

1. Higher-quality work

A huge benefit of team-based pricing is that clients are guaranteed a better return on their investment. With a fixed-fee approach, team members aren’t distracted by tracking hours or creatively stifled by deadlines and budget restrictions. They can focus solely on doing the best job for our clients. When unexpected developments crop up, our team members can pivot while staying within the contract's scope. And if they're inspired to go above and beyond on a project, they can do so without worrying about destroying the budget.

Not long ago, while working on a design-heavy project for a nonprofit, one of our designers felt deep down that the work just wasn’t up to snuff. He stayed late a few nights and ended up really amping up the project’s quality. Our client wasn’t charged for the additional hours, and we were able to deliver a finished product that reflected our high standards as a company.

2. Team fluidity

In the early days of a recent project for a major financial firm, our user research and design teams were taking on the bulk of the work. But as time went on, we needed less from those two teams and more input from engineers working on product code. Because of our team-based approach to business, we were able to switch a few members out for additional engineers without slowing the project's progress or impacting the client's total cost.

Team-based pricing gives us the freedom to float members in and out of projects based on what’s needed at any given time. If a job requires extra team members, more oversight from a director, or input from a specialist — like an illustrator or animation expert — our clients can rest assured that we’ll pull in the right players without pestering them for approval or raising prices.

3. Budgeting benefits

When evaluating the options for any contracting project, budgets matter — and certain pricing plans make it nearly impossible to manage cash flow or guarantee a good ROI. Projects priced by the hour can fluctuate as much as 30 to 40 percent from week to week. And because fixed-fee projects allow consultants to do as little work as possible for their paycheck, they’re notorious for slipshod work.

That’s why straightforward weekly pricing appeals so much to our customers. It simplifies budgeting and makes accounting a breeze. There are no unexpected expenses and no need to constantly call on our clients to approve more funds. Financial matters are squared away from the start, allowing us to focus solely on delivering the best results to our clients.

Whether you’re hiring a nanny for your kids or a consulting team for your business, it’s important to consider how your choice will affect your budget and long-term financial stability. Find a solution that not only offers an accurate forecast of your expenses, but also guarantees you’re getting the results you want.

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Emerson Taymor is Philosophie's Cofounder and the Managing Director of our New York office. Emerson is passionate about working with clients to create products that drive business results. Outside of work, he teaches front-end web development at General Assembly.

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