Implementing Value Pricing: A Radical Business Model for Professional Firms

CHAPTER 27

The Eight Steps at a Glance

We have been disappointed before, swindled by promises that it seemed––and were––too good to be true. … Our worries are our safe boundaries; over time we have learned to identify with our limits. Now, leery of trusting the promise of an oasis, we defend the merits of the desert.

––Marilyn Ferguson, The Aquarian Conspiracy, 1987

I offer no oasis in this section of the book—just hard work, and a more optimal pricing model along with the challenge to focus on what the customer is really purchasing from your firm: value.

The criticisms leveled against hourly billing in this book have centered on it being a suboptimal pricing strategy. Value pricing is a more optimal model as it comports to the economic and behavioral laws of customer value. Recall the word optimal to a management scientist or engineer means: the best solution relative to a stated set of objectives, constraints, and assumptions.

Since hours spent on a engagement do not relate to the value created, if the objective of the firm is to maximize—or even optimize—profits, then value pricing needs to become a core competency so firms are better able to align price commensurate with the value they create. Pricing is one of the most important, and convincing, forms of communication and positioning for firms. Price is also the start of a relationship with new customers, and cutting price is the equivalent of giving up respect, akin to being a supplicant to your customer rather than their ...