Why architectural service pricing is going to change in the face of AI

By Tracey Shirtcliff, founder and CEO of SCOPE Better

Architects typically bill in three ways. When working in collaboration with a construction company, they may bill for a percentage of the overall project. If the parameters of a project are fully defined in advance, some architects are willing to work on an agreed lump sum basis.

However, by far the most common form of project pricing is time/effort-based. It’s the established model and has been in place for generations. That said, with artificial intelligence (AI) creeping into all sectors, working practices are being transformed. Essential processes take less time and effort while improving accuracy and operational performance across the board. For many industries reliant on a time/effort-based pricing model, that can only mean change.

Architecture, AI, and pricing

In architecture, AI is already being deployed. Supporting the rapid exploration of diverse design options and using various metrics and data to support the optimisation of the design process. AI saves time and effort while producing faster and more accurate results. It’s a positive development from every perspective, but it does carry significant implications for pricing.

When your work is accelerated and you’re billing by the hour, in a transparent world, the obvious implication is that you have to charge less, even if your customers are getting more value. However, by reducing your fees, you are essentially devaluing both your work and your skills. It doesn’t make financial or professional sense, but there are no honest alternatives while retaining your established pricing model. Deliverable-based pricing – also known as asset or outcome-based pricing – is the obvious, viable alternative.

A focus on deliverables

The Simon Kucher Institute states that 0% of firms currently have a plan in place for AI’s impact on their revenue model. For most businesses, the unexpectedly rapid evolution and adoption of AI applications has left little time for planning. Whatever the reason, the focus now has to be on finding a viable solution, and for many professional services, that solution will be deliverable-based pricing.

Deliverable-based pricing allows you to put a delineated value on the services you offer your clients. So, instead of charging for a number of hours, you are billing for a definable outcome that carries clear, understandable value for your clients. Importantly, it’s a value that is not quantified through the time associated with the project’s creation, so no matter what goes into the project, your fee is secured as long as you deliver the agreed service.

Transforming your pricing model

Like most fundamental process changes, it can seem like a huge undertaking to reevaluate your pricing model. Knowing where to start is challenging, but it’s also simpler than most people imagine, especially when using tools like configure, price and quote (CPQ) software. If you have a deep understanding of what typically goes into each of your services and influences their value, you can create a cost-plus framework model for each of your deliverables, which not only makes your pricing strategy simple but more appealing and comprehensible from the perspective of your clients.

Time/effort-based pricing has been adhered to because it is simple, but it is also massively outdated. The amount of time you spend on a task doesn’t mean much to your client, what your clients want to know is exactly what you are going to deliver to them, and how much it is going to cost. Deliverable-based pricing serves that purpose, replacing opacity with clarity, making your services easier to understand and value, while ensuring that your business doesn’t suffer from the changes to processes that are both facilitated and made necessary by AI.