Understanding Web Design Costs: An Evaluation of The Different Types of Contracts

How much does it cost to design a website? Learn about the main types of contracts, along with their pros and cons.

“I want to do digital marketing. How much does it cost to design a website?”

That’s a question we get pretty often here at Appiloque, and the truth is, it really depends.

But hey, that doesn’t mean that we can’t share more information about how web design & development companies typically price their services.

Today, we’ll be covering a few main types of contracts: Fixed-price, time and materials, package, and retainer pricing.

1. Fixed-price contracts

Otherwise known as a “flat fee” or “project-based” fee, the total cost is decided before the start of a project. 

This model is based on a general estimation of difficulty and duration of a given job. For instance, a web design & development company quotes you X amount to build your site – this fee remains the same regardless of the resources they utilize or time they spend building your site.

Let’s discuss the pros and cons of fixed pricing.

Pros of fixed pricing

The fixed-price contract is generally favored by clients for the perceived reduction of risk:

  • Costs are predictable: You know the precise amount that you’re spending and also get a good idea about what you’re getting for the price.
  • Project is more manageable: With work specifications agreed upfront, it makes setting deadlines and milestones relatively straightforward, thereby leading to an easy-to-manage project.
  • Client involvement is reduced: You spend less time corresponding with your web design & development company once the parameters of your project have been set – which means more time to focus on other aspects of your work, such as your upcoming digital marketing plans.

Cons of fixed pricing

Realistically speaking, you may not know if you’ve asked for the right thing until you see your web design taking shape. As a result, the biggest challenge is usually about your project’s scope of work and any change requests:

  • Less flexibility, more negotiation: The scope of work is explicitly defined in flat-fee projects because the cost doesn’t change. If your requirements become clearer during the site-building process (but you’ve already agreed to the defined scope of work), then there’s likely to be negotiations on added costs. After all, while good developers aim to produce the best final product, fixed prices limit the number of amendments they’ll make and the time they’ll spend on your website. 
  • All planning must be done upfront: You’ll need to thoroughly pre-plan and map out your specifications – something that takes considerable time to complete. Of course, your web design & development company can help with the specifications, but for the best possible results with a fixed rate, you’ll need to take part and collaborate.
  • Client involvement is reduced: This can be either an advantage (see above) or disadvantage. With your vendor working in isolation, there’s a higher chance that the end product, while meeting specifications, does not meet your expectations. 

When is fixed pricing your best choice?

  • Clearly defined projects: A project with well-detailed specifications (such as one that already has a working prototype) will work well with fixed pricing.
  • Smaller projects: Fixed pricing is ideal for small projects as there’s less effort required, which reduces the risk involved.  
  • Budget constraints: For tight budgets, fixed pricing can help you ensure that you pay only what you can afford, with allowable compromises on quality.
  • Strict deadlines: Well-detailed specifications help with estimation of time required, and as such, any accompanying deadlines and milestones.

2. Time and materials contracts

Time and materials (T&M) contracts are based on your web design & development company’s time-based rates (hourly or daily), and the cost of “materials” used while building your site. 

Examples of “material” expenses include domain name registration, hosting, software licenses, third party plugins, stock photography and so on. Such expenses are very common for web design projects, and should be something that you enquire about before starting work. 

For greater clarity, ask your vendor for a rate card that details out the time-based cost for each of their team members that might be involved in your project.

Also, it’d be wise to keep in mind that your Statement of Work (SOW) will only loosely define project deliverables. Your web design & development company will not be held accountable if the deliverables are not completed.

In cases where there’s a budget limit, your vendor will stop working on your project once they’ve depleted the budget.

For contracts with no budget limit, your vendor will continue to work until the website meets your expectations.

Pros of time and materials contracts

  • Greater flexibility, lesser conflict: Since your web design & development company can seamlessly add charges when you make changes, this removes the uncomfortable “scope creep” discussions and keeps everyone focused on the project’s goals and success. This would be useful if you’re in the midst of working out your digital marketing plans, and need an agile working arrangement.
  • Time savings through an agile approach: Without the need for a formal “change request” which may involve estimations and negotiations, your project is able to move at a faster pace.
  • Task prioritization: T&M contracts encourage teams to focus on the most essential and potentially tricky tasks first, rather than following a strict sequence of project deliverables.
  • Collaborative client-agency relationship: An agile approach typically means more involvement from the client to discuss ideas and priorities. With more communication, this naturally means that both parties are likely to be on the same page, resulting in a more successful project.

Cons of time and materials contracts

  • Unpredictable costs: Budgeting is tricky with T&M. It’s impossible to come up with an accurate estimate of the total costs at the beginning of a project. As such, it’s not uncommon for the end-price to exceed a client’s original expectations.
  • Time overruns: It’s equally challenging to budget for time spent with T&M. Intended deadlines may go awry to deliver an excellent end product, although efficient project management mitigates this potential roadblock.
  • Client involvement is high: A higher involvement comes naturally with a collaborative relationship (see above), but some clients may lack the internal resources or skill sets for an efficient project.

When is a time and materials contract your best choice?

  • Flexible requirements: Choose T&M when the specifications and scope of your project seem vague or you envision several changes along the way.
  • Larger projects: The bigger the project, the less likely a fixed rate can accurately represent the time and resources required.
  • New concepts: T&Ms will give your web design & development company the extra time needed when adjusting to brand new concepts. Seeing as nobody has a reference point to work with, the flexibility is highly valuable in this scenario.
  • Long-term projects: For projects that are ongoing and likely to evolve overtime, T&Ms remove the need for renegotiations as work continues.
  • Trusted relationships between client and agency: There’s a higher chance that your T&M contract will be a success if you know that you can trust your vendor’s capabilities.

Are there other pricing models?

Definitely. These are two other common models that web design & development companies use.

Package pricing

These typically involve upfront pricing, even before any needs analysis is done. 

For web design, this happens most often for WordPress template customizations. Yes, there are template modifications so that the content and imagery is relevant, but you won’t be getting a web design that’s tailored specifically for your brand.

Retainer pricing

Retainers are pre-set and pre-billed fees for a specified period of time or volume of work.

For time-based retainers, you may decide to buy 40 hours of work per month at $100 per hour for instance.

Time-based retainers are either rolling or use-it-or-lose-it:

  • Rolling retainers ‘roll’ over your unused hours to the next month
  • Use-it-or-lose-it retainers mean that you lose any unused time for the current month once it passes

For value-based retainers, you might specify the recurring deliverables you need, and pay $4,000 per month for these specified deliverables, regardless of the amount of time it takes. 

Revamping your web design or building a new website to complement your digital marketing strategy?

If you’re looking to engage a web design & development company, check out this article where we demystify the process of hiring an agency. 

Or, you could just talk to us. We’d love to learn more about your business and how we can help 🙂

Lisa Tan

Lisa Tan

Lisa wears multiple hats at Appiloque - digital strategy, agency operations, and content marketing. To keep herself sane, her favourite form of entertainment is free and involves reframing reality, changing it up to something ridiculous and playing out imaginative scenarios. No, she's not mad. Yet.

Learn more about the services mentioned

You might also like

© Appiloque Pte. Ltd. 2014 – 2022. All rights reserved.