Countless times the developers (including us) receive a question: ‘How much will so and so cost?’ Apart from the obvious lack of sufficient details in this question, there is also the case of pricing models. There are various types of scopes of work. You may want to just develop a product, which usually is pretty straightforward work. However, your project might involve many stages and subproducts and you may also need the ongoing post-development maintenance processes. We have already discussed Fixed Cost and Time & Material pricing models. Now, the time has come to introduce yet another model Sailing Byte uses, a hybrid pricing model.
Fixed cost vs T&M pricing model
To better explain what the hybrid model delivers, let us go through a brief reminder regarding the fixed cost and T&M pricing models.
Fixed Cost model in a nutshell
In this model, the client receives a certain price for a clearly defined scope of work that the developer performs. It is perfect for small projects, where no additional maintenance is needed. With a fixed cost model, most settings of the projects are clearly predefined and the coding is a straightforward task. We use simple tools and technologies to deliver predictable outcomes. The client is usually not involved in the development process within the fixed cost pricing model. The model also has some cons, such as no support included in the price or almost no margin for any adjustments or changes to the original development plan.
Time and Material model in a few words
If you have a product to develop, which will need maintenance afterwards or you plan to become our long-term customer, T&M is the way to go. Firstly, we will ask you about your needs. Based on them our developers will build the MVP (minimum viable product) by applying agile, iterative frameworks/tools such as Scrum (or ScrumBan/KanBan). You will pay monthly for the time we devote to your product and the technology needed to develop it (material).
It is the solution we use for complex products that will take a long time to develop and will most likely require maintenance. During that time there will be changes to requirements based on feedback you receive from the users. Thanks to that we will adjust the direction and the scope of work to create the highest quality product.
What is a hybrid pricing model?
As you can probably suspect, the hybrid pricing model will land somewhere in between the two previously described pricing models. It is very similar to the fixed cost model, however, it allows for additional flexibility. You can introduce some changes thanks to the time and material model.
When is a hybrid model used?
Several features indicate that the hybrid pricing model is the solution to choose.
Changing requirements
This is a common feature with the T&M model, if you know only a few requirements and the rest is unknown, T&M or hybrid models are the way to go. They enable you to add new features, or platforms, and change other aspects during the project. Additionally, you can still expect fast execution.
Many revisions required
You probably have a clear vision of the end product. However, not always clients realise how to get there. In such cases, hybrid pricing is a sound choice. It gives the chance to conduct multiple reviews and apply changes (if necessary).
There is a set deadline
Similar to fixed-price projects, the hybrid model is perfect for short-term projects with a fixed deadline. However, at the same time, it also adds other benefits, such as the ability to change the requirements and adjust the budget.
Benefits of the hybrid pricing model
The hybrid model has a few useful advantages that will be appreciated by many clients.
Cost-effectiveness
The hybrid pricing model allows clients to resign from some software development aspects that do not apply to their projects. This may lower the costs significantly. Saved resources can be devoted to adding services that you find crucial for the project’s success.
Client’s involvement
In many aspects, the hybrid pricing model is very flexible. One of the main areas is the level of the client’s involvement in the product development. You can choose to review the project after reaching important milestones. You can also choose to receive regular updates or communicate with developers via various channels with a greater frequency.
Boost in revenue growth
Price optimization allows for more customers to use products according to various plans. Therefore, there is no need to broaden the portfolio but simply offer various access based on the price paid. Thanks to that the revenue growth is accelerated and companies which use the hybrid model pricing reach a wider number of customers and also tend to retain them and maintain a greater relationship with them.
Customer-focused service
The hybrid pricing model is essentially the sweet spot between offering competitive prices and maximization of revenue potential. The clients do not have to overspend on services they do not use. Moreover, they have the possibility of customization and deciding what to spend the money on. This is in accordance with the fact that customers are used to paying more for extra features. Overall, the pricing is not increased out of proportion and makes customer experience.
Disadvantages of the hybrid pricing model
Undefined budget
Because the hybrid pricing model is flexible and you can adjust the model as you please, predicting the cost of the project is rather not possible before its commencement. It is intensified by the unclear requirements that are likely to change and affect the project price.
Uncertain start time
Even though the hybrid model guarantees work according to deadlines, the start of the project might not be too quick. This is because the preparation phase tends to be more time-consuming. It is a result of many factors that need to be agreed on with the client, such as the budget, project scope, or deadline.
Hybrid pricing model at Sailing Byte
Every project is different and requires completing different tasks. However, the approach and the terms of our hybrid pricing model are set. Let us introduce how the hybrid model looks like at Sailing Byte:
- we work in Agile and according to its 12 principles, which allows for changes in requirements, methods, and designs throughout the project.
- the final costs of project development are not determined or guaranteed due to the specificity of Agile software development
- the work on the project is settled monthly by paying an invoice issued by the 10th day of every month
- if any additional costs occur, (i.e. additional tools and technologies, travel costs, hotel costs) Sailing Byte obtains the Customer's prior consent to cover them and then includes them in the next invoice.
- a detailed price list specifying hourly rates for every Role and Technology Stack of the Sailing Byte team is available for viewing in the form of the Price and Technology Table.
If you have any questions regarding the hybrid pricing model or are wondering which model might work best in the case of your project, do not hesitate to get in touch. Book a call today and start implementing your idea in real life with our help.
