Value based pricing has been around long enough for misunderstandings and myths to develop. Some of these may be putting you off, or making you feel that it’s not for you. Here are the most common objections. Read, and make your own mind up.
“I Really Can’t See That Our Services Are Worth That Much More”
You can’t. Nobody can see the full value of what they do, any more than they can see the back of their head or see up their own nostrils. We are just too close. It takes an outsider to point out our full value, backed up with a process.
“The Value Of Our Services Can’t Be Quantified”
This is not a problem. There are many forms of value which can’t be quantified; enhancement of reputation for example. If the value is there, even subjectively, clients will pay if the proposition is presented the right way. One of my clients, a digital agency, does very well offering reassurance.
“It’s Too Subjective, Too Much Like A Black Art”
This one makes me cross. It simply comes from the people promoting value based pricing being lazy, not having a properly worked out method. I am a former CFO who comes from a family of physicists and engineers. I believe in repeatable, empirically tested processes. The Intelligent Pricing Architecture process is exactly that.
“If Our Service Is Good Enough, Clients Will See The Value And Pay Us Accordingly”
Unfortunately not. Obviously you need to provide a high quality service, but you also need to present it in a way that convinces others, who see things in a very different way from you. This is something you need to learn, but there is some good news. Compared to the effort it took to learn to do what you do, learning how to get properly paid is a walk in the park. An hour a week for a number of months.
“We Have Too Much Else Golng On To Think About This”
Be honest. There’s always going to be a lot going on. If you say “we’ll get to this later’” accept that “later” means “never.” The good news is that the process is designed to be very economical of your time. We meet typically once a week for 50 minutes. I do 90% of the hard thinking. The rest of the week you do whatever you would otherwise be doing – managing projects, talking to clients, hunting for new business, writing proposals – but do it more effectively.
“Does This Mean You Guarantee To Produce This Value?”
We sometimes get this question. Here is the answer; you obviously need to put it into the right words for the person you’re talking to.
“No. We can’t offer a guarantee, because there are too many factors which we can’t control. Anyway, if we could guarantee a result of, say, $1,000,000, we would be asking you for $500,000 at least, probably $750,000.
“What we are offering is something that moves the odds substantially in your favour. For this you pay a fee which gives you a 10x return, i.e. $100,000.”