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Pillar 5: Value Pricing


The series is from Chartered Accountant, consultant and author, Jeff Borschowa, from his book, 8 Pillars for Exponential Business Growth. The series is focused on how to find new and better ways to integrate innovation and technology to enhance the customer experience and improve efficiency in the accounting process.

You could probably argue that pricing could fit under one of the other pillars. I separate it out in order to emphasize how important it is, especially for professional service firms. The traditional model of billing for services is based on a single formula: hours worked multiplied by an hourly rate is equal to the fee to be billed. This formula creates an inherent conflict of interest between you and your customers. They want you to work faster, but you make more money if you work slower. Notice that the equation does not include any consideration of the value of the work as seen in the eyes of the customer.

Take another look at the equation, you will see that implementing systems to become more efficient reduces your time spent on the work. Thus, your earnings also decrease if you become more efficient. Value pricing focuses on the value that you provide to a customer. Customers are looking for value, they don’t place true value on your time, only the outcome that you ultimately produce with your time.

We don’t want to ignore businesses that sell products. In a lot of cases, you are limited by pricing that your competitors may be setting in a marketplace. However, if you have a niche and can focus on your ideal customer, you may be able to put together a complete bundle of products that would be worth more as a bundle than individually. For example, the pet car industry realized that people who bought pet birds would often buy cages, feed, and other items at the same time. They bundled packages together for convenience and found that the packages were selling for more than the individual components.