Jason Cohen is the founder and CTO of WP Engine. He started the company in 2010, and it has grown to 270 employees in four locations. Over his career, he has started four different companies, both bootstrapped and venture-backed. He also has a start-up incubator in Austin called the Capital Factory.
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How to Price Intangible Value
- What is the most important thing you can share about pricing?
- Everyone says “charge more” and that is true.
- How can I deliver 10 times the amount of value I am creating now?
- What if I forced you to multiply your price by 10, what would you have to do?
- If you do those things, how much could you charge?
- 10X is a common phrase and magic number to measure change.
- If you think big and do not hit it, that is fine because you are stretching your thoughts.
- How can someone place a value on something that is intangible?
- You can put a frame around intangible value.
- Take the customer feedback, print it out, and literally frame it and put it on the wall.
- Be an ally and partner, rather than another “vendor your customer has to deal with.”
- Not all important things are numbers. You can still quantify it, even if it is a paragraph.
- You have to earn trust and referrals.
- Credibility – The first step is to establish that you deserve to sell the service.
- Respect – Do you have insights and is your opinion interesting? Customer testimonials can also help.
- Trust – You must earn the trust by delivering the service consistently and doing what you say you are going to do.
- Advocacy – All of the above plus your customer willing to put their reputation on the line to refer you.
- What is your opinion of the current trend in value pricing?
- As a business owner, you should be interested in what is best to operate your business, both on how much profit you earn and how you serve your customer.
- You should be less interested in what others say.
- Just because it is a trend, does not mean you need to agree, but it is useful to study and think.
- Ideally you would charge every customer the most they would be willing to pay and not take any customer that will not pay more than your personal minimum.
- If you do value pricing, you can justify the price better than cost-plus.
- You have to ensure that the price will cover your costs.
- Because you are an expert, it is cheaper or easier for you to do, but not your customer.
- The expertise differential is Economics 101.
- The smaller you are, the more you can run experiments.
- Value pricing is talking about how much value you can deliver to the customer regardless of the cost.
- Price to a budget or a certain threshold amount (for the customer).
- Some customers have a particular dollar amount that they cannot exceed.
- The budget may be more important than the value created by the product.
What Does the Customer Value?
- When is the right time to discuss price or budget with a customer?
- Can the customer really think about it in the terms of the value they are getting for the product?
- Budget is one of the things that forces the issue – it does not matter what they get for the product, they cannot spend more than X.
- How is the customer valuing the solution?
- An ROI might not be the right way to sell.
- In a large organization, the individual, who is your advocate, is putting their reputation on the line when selling in your service or product.
- From a business perspective, you can look at irrational decisions as a way you can profit.
- If you are talking about a business, rather than a consumer, it is easy to ask about the budget early in the conversation.
- Establish ahead of time that the customer can pay for it at the end of the day.
- What can the customer spend and who controls the budget?
- Spending time on a sales process that is not going to work is a big waste of time.
- Being honest is a great way to determine if it is a good fit.
- You can sometimes get more business based on a referral, by telling a business that you are not the best fit.
- As a small business, what can you do that a competitor or big business cannot?
- What is the most important pricing lesson you learned at WP Engine?
- There are a lot of different types of customers at a lot of different price points.
- The way you package the tiers can significantly change your revenue growth projection.
- Do not nickel and dime your customers.
- You can try ways of getting customers, that did not originally work, with different pricing and timing. You might learn that it will work.
- What is one of your best stories about creating value for a customer?
- A customer damaged their site and blamed WP Engine. WPE fixed it, and the customer was grateful and apologetic.
- The customer had missed his daughter's second birthday party last year. He said he knew he would go to her third birthday party since WPE was now looking out for him.
- That is a very personal statement, emotionally connecting the work to value that has nothing to do with hosting.
- The emotional connection can be the ultimate in value pricing.
About Jason Cohen
- Website: WPEngine.com
- Blog: ASmartBear.com
- Twitter: @ASmartBear
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