It has been four years since I switched the business model at MightyData from hourly billing to value pricing. As I look back on my journey, I can see four stages of growth. I call them stages of growth because value pricing is a “road less traveled”. The art of value is not something you conquer or complete. It is a process of discovery, innovation and exploration.
1. Believe You Create Value
The first stage is believing you create value when you serve the customer. Another way to say it is that you need confidence in your ability to help the customer achieve a certain result or outcome. I honestly think one reason more professionals do not adopt value pricing is because of fear. A great weapon against fear is self-confidence — not ego, but a genuine belief your customer will be in a better place after his interaction with you.
2. Recognize the Value You Create
Once you believe you create value, the next stage is to recognize the value you help the customer create. While the first stage focuses internally, this stage looks externally. You want to move beyond the specific thing you are doing (application, campaign, website, etc.) to the impact the thing has. What will change in the life of the customer? What will be increased, decreased, reduced or eliminated? This stage is about focusing on the end result of the work rather than the work itself.
3. Ask the Right Questions
Next, learn to ask questions to uncover value from the customer's perspective. Some ways to create value are easy for either party to see. Other ways can only be identified through the customer's eyes. Usually only 20% of an iceberg is visible above water. The same is true with value. While the percentage may differ, there is value only the customer can perceive. It is his business after all. You want to learn to ask the customer not simply what he wants but why he wants it, and what the result will do for him. If you understand how he perceives value, you can create better options and prices.
4. Boldly Discuss Value
The fourth stage is to boldly discuss the value created with the customer. This is the stage where I am currently growing. The purpose is to shine the light on the end result and use it to make joint decisions about scope, priority and price. Some customers are not ready or willing to go there. It requires trust between the customer and the professional. It also requires courage. Many customers have never had a conversation like this with their accountant, consultant or designer. Taking a step into the unknown is risky. But remember, no risk, no reward.
Question: Where are you in the four stages of growth for value pricing? You can leave a comment using the form below.