Let's start with the fundamentals. What exactly is pricing?
Pricing is fundamentally a number put on the value of transaction by two parties.
So getting this number right is vital for both the company providing the pricing and the satisfaction of the customer receiving the pricing.
For drone services, it’s essential to understand what is being asked vs what’s being delivered and how the deliverable is helping the end customer or stakeholder.
But how do we do that?
We’ll have a look at several different approaches in this guide.
Approach #1: Pricing by Costs
The pricing-by-costs approach involves tallying up all of your costs for the drone services you are proving and charging a multiple on top.
For example, it may cost you $100 per job to actually deliver the job in hand, with this in mind you may decide to aim for a 5x multiple on your costs. This would equate to $500 per job.
Pros: This approach ensures that you never charge below what it costs you as the operator.
Cons: This approach is correlated with your costs but not with your customer’s value. The customer doesn’t care how much it costs you, they care about how much value it brings them.
Approach #2: Pricing by Competitors
The pricing-by-competitors approach involves building an understanding of what your competitors are charging or the “market price” for your services.
Once you know the market price, you can decide to charge around the same, lower or higher than the market price.
Generally speaking, with this approach, you want to be priced more competitively to gain an advantage in the market and win your potential client base.
Pros: This approach ensures that you are not over-charing or under-charging when compared to your competitors.
Cons: This approach is more correlated to your competitors. If they get it wrong, you get it wrong! If everyone in the market follows this approach, it’s a race to the bottom!
Approach 3: Pricing by Value
The pricing-by-value approach involves building a deep understanding of how your services or deliverable is adding value, for example, time or cost, to your client.
Once you know how much time or cost is being saved or made by your customer, you can charge X% of that value. For example, if a customer saved $10,000 of work because of your deliverable, you can charge 10% of that savings ($1000) as your price.
This approach allows you to tie your costs in with your customer’s value and also helps build transparency with your customer with regard to why something costs the way it does.
Pros: This approach ensures that your price is only a % of the total value generated for the customer.
Cons: This approach is built on the idea that you correctly understand the value to the customer, which typically involves additional time invested and time spent with the customer.
What Approach Should You Use?
Here at Hammer Missions, we believe that a singular pricing approach does scale. It is more important to look at your services from all three of the above approaches and to look at the absolute pricing as a combination of the 3 approaches.
1. Generally speaking, you do not want to charge below your costs, see Approach 1
2. If you are in a highly competitive and commoditised market, where everyone is providing the same services, you do not want to charge above your competitors, see Approach 2
3. Lastly, if you are providing a very differentiated service which is very niche and you hold a unique competitive advantage (e.g. the relationship with your client), then in those scenarios, you should always charge by value. This allows you to reinvest the profits from the contract and re-invest in scaling your services., see Approach 3
Here's a table putting weighing up the pros and cons of all 3 approaches:
1. Pricing by Costs
Ensures you never charge below your costs.
You might be undercharging inhibiting you from growing your business.
2. Pricing by Competition
Ensures you never charge above competition.
If your competition gets it wrong, you get it wrong!
3. Pricing by Value
Ensures you are charging a % of the value you are creating.
Requires more time and efforts understanding the value to each customer.
Pricing can be a very difficult exercise to undertake but there are methodical ways of looking at it, making it up as you go along is not good practice and could harm not only your business but the industry as a whole.
We hope this article gives you an insight into the costs of a drone survey or inspection.
If you'd like to learn more about how to capture high-quality data and get the most out of your drone flights using our cloud-based platform, please feel free to visit our learning resources.
To learn more about our enterprise solutions, including mission collaboration, data processing, and AI solutions, please contact us at email@example.com.
We look forward to hearing from you.
— Team at Hammer Missions