Paul Kennedy is a co-founder and partner at O'Byrne & Kennedy (OBK), a chartered accounting firm in the United Kingdom. He is also a Practicing Fellow at VeraSage. In this episode, we explore the OBK journey to value pricing. In the first segment, Paul explains how OBK transitioned to value pricing over a 5-6 year period. During the second segment, Paul discusses the influence of value pricing on their customers and services.
The Switch to Value Pricing
What is the most important thing you can share about pricing?
Pricing is worthy of the attention of every business owner. Even a small change in price can have a disproportionate impact on profitability. However, few service professionals give it the consideration it deserves. This is the pricing paradox.
What was your first exposure to value pricing?
Paul Kenney went to an Accounting Bootcamp taught by Paul Dunn and Rick Payne. They taught that accountants could offer more value if they simply did what their clients needed. Paul K. came back and started focusing on creating value for clients.
Later his business partner, Paul O'Byrne, went on a speaking tour with Ron Baker. Due to Ron's influence, O'Byrne & Kennedy stopped tracking time in their accounting practice. They came to refer to their business as the “Ron Baker laboratory”.
O'Byrne & Kennedy learned value pricing in three stages.
- Start pricing in advance.
- Offer the customer options.
- Stop pricing your own work.
What advice would you give to a firm that is ready to make the transition?
- Determine how you create value.
- Determine for whom you create it.
- Select your strongest value proposition.
- Write a proposal and price on purpose.
- Believe you create value and experiment.
How has the CitizenM Hotel avoided the commodity trap?
The hotel selected a target market they call “mobile.” They tailored the value they create specifically for those travelers. The room key is delivered from a kiosk. The rooms are small, with high-quality mattresses, blackout shades, and free wifi. The lobby is a large open area with a 24-hour coffee bar. They only offer services their guests truly want. (Disruptive Business Models by Paul K.)
The Practice of Value Pricing
Why do you advocate firing the customer every year?
At the end of each contract, the client is technically no longer a customer. OBK asks the client if they delivered the value that was expected. They also ask the client what they could do better in the future. OBK does not assume the client will remain a customer.
What is the OBK MBA?
OBK targets business owners who believe they can do something extraordinary with their business. OBK found these individuals were very aware of their personal development. They created an educational framework to teach their customers what they need to operate a successful business called the OBK MBA.
How do you approach the value conversation with a customer?
Paul has a very candid conversation with the customer about their goals and how OBK can help achieve them. Occasionally, he has to be sensitive that now is not the right time for a conversation. Ultimately, he wants to provide the services the client truly needs and those can only be uncovered through a value conversation.
What is the state of value pricing in the United Kingdom?
It is common for professional firms to offer fixed prices. However, it is market driven. Value pricing is not very well understood.
What is one of your best stories about creating value for a customer?
If you help two customers create 1-million dollars in value, their perception of the value is not the same. It depends on the context of each customer and their view of your contribution to creating the value. The customer is always the hero in the collaboration.