Each company is free to set its own rates and has several pricing models at its disposal, such as pay-as-you-go, subscription, time-based, and fixed pricing. This article will address the main characteristics of fixed pricing, including advantages and disadvantages.

What’s in this article?

• Fixed pricing and how it works
  
• When to use fixed pricing
  
• Advantages and disadvantages of fixed pricing
  
• Determining the ideal fixed price
  
• How Stripe can help
  

Fixed pricing and how it works

Fixed pricing is a rate strategy where the user pays a set amount to access a good or service. The price is agreed in advance and does not vary depending on usage, quantity delivered, problems encountered, or time spent by the service provider. This approach is best suited to items and offerings that are clearly defined and to situations in which each customer receives essentially the same value.

When to use fixed pricing

A set price is helpful if a business prefers to receive a global sum for the entire project. This model lets the business focus on its mission and highlight the expertise it provides, without having to calculate hours worked or the client’s actual consumption (as is the case with time- or usage-based rates). Customers often prefer a fixed cost because it gives a clear, upfront view of the total charge. However, with flat pricing the seller must be able to account for its own expenses, the value of the offering's duration and the seller's know-how, and (to avoid financial loss) a margin for unforeseen expenses.

Fixed pricing is ideal when a business:

• Is able to precisely define a product or service and easily delineate the scope of the project
  
• Has costs that are relatively set
  
• Would like to test new offerings with a target market
  
• Prefers to emphasize a product or service’s worth rather than time spent or actual consumption
  

In France, fixed pricing is most often used for software-as-a-service (SaaS) and micro-SaaS solutions by self-employed professionals and by health insurance companies. Marketing services are also usually charged on a flat-rate basis.

For complex or evolving initiatives—such as legal work—billing by incurred duration logged is the better approach, using hourly or daily rates so all hours or days worked are paid in full.

Advantages and disadvantages of fixed pricing

Fixed pricing offers multiple benefits to companies and customers:

• Straightforward management, especially for billing and accounting
  
• A shorter sales cycle since clients know the cost in advance and are easier to convince
  
• Pricing tied to the value provided and not time spent, making it possible to focus on other aspects of the business
  
• Predictable financial results, leading to better cash flow management
  

This rate structure also has drawbacks:

• Underestimating project investment in terms of cost and effort can lead to undercharging and impact profitability, so proper forecasting is imperative
  
• Fixed pricing is not well-suited to some offerings and might not perform effectively when requirements change
  

It’s important to carefully consider this approach before putting it in place, since it’s difficult to revise a set price once it’s been agreed with the customer, regardless of unexpected circumstances or challenges during project implementation.

Advantages and disadvantages of fixed pricing

Determining the ideal fixed price

The ideal set price reflects the type of support or items provided, their complexity, competitor rates, and shopper preferences. What is the charge they are prepared to pay? What is the perceived merit of the goods or service? Conducting in-depth market research and considering competitors’ pricing strategies are imperative.

Define the scope of the project, product, or offering clearly and in full: state precisely what the work includes and what customers expect. When setting the rate, account for the expertise, experience, and value delivered, as well as the time required to complete the work.

Lastly, it’s key also to include a margin to cover any unexpected costs. Market and industry knowledge are important when setting a fixed amount.

How Stripe can help

Stripe Billing lets you bill and manage customers however you want—from simple recurring billing to usage-based billing and sales-negotiated contracts. Start accepting recurring payments globally in minutes—no code required—or build a custom integration using the API.

Stripe Billing can help you:

• Offer flexible pricing: Respond to user demand faster with flexible pricing models, including usage-based, tiered, flat-fee plus overage, and more. Support for coupons, free trials, prorations, and add-ons is built-in.
  
• Expand globally: Increase conversion by offering customers’ preferred payment methods. Stripe supports 125+ local payment methods and 130+ currencies.
  
• Increase revenue and reduce churn: Improve revenue capture and reduce involuntary churn with Smart Retries and recovery workflow automations. Stripe recovery tools helped users recover over $6.5 billion in revenue in 2024.
  
• Boost efficiency: Use Stripe’s modular tax, revenue reporting, and data tools to consolidate multiple revenue systems into one. Easily integrate with third-party software.
  

Learn more about Stripe Billing, or get started today.