Art of Value Interview: Value Pricing

I was honored to be interviewed by my VeraSage Institute practicing fellow, Kirk Bowman.

You can listen to the hour-long interview here.

Here is a summary of the topics we discussed.

What is the most important thing you can share about pricing?

• Prices are ultimately set by value, not by the competition or supply/demand, but by value.
• Value is subjective. It is a feeling, not a number.
• A value price is the maximum price a consumer will pay for an item
• The customer has to make a profit too.
• The value graph:
  • Customers don’t care about the cost to the business.
  • The price set has to be above the cost or the business makes no profit.
  • The value has to exceed the price or the customer makes no profit.
• Ron switched to value pricing to enhance the customer experience.
• Offer the customer a money-back guarantee.

What are the first three steps to implement value pricing?

• Conversation
  • The customer should talk 80% of the time; consultant only 20%.
  • The art of questioning can differentiate you from the competition.
  • Ron’s favorite opening question is, “We will only undertake this engagement if we can agree, to our mutual satisfaction, that the value we are creating is greater than the price we are charging you. Is that acceptable?”
• Pricing the Customer
  • Price the customer, not the service.
  • Airlines are a great example of pricing the customer.
  • Ron explained setting three prices for a customer: Reservation, Hope For and Fist Pump
• Developing and Pricing Options
  • Empirical evidence shows that customers like having choices.
  • Two laws of marketing: All value is subjective. All prices are contextual.
  • Get the customer to compare you to yourself: Should I work with you? vs. How should I work with you?

What are some options you like to use with customers?

• Timing.
• Payment terms.
• Technology.
• Ron explains the Concentric Circles approach to pricing by Chris Marston.
• Materialist vs. spiritual value.
• We get better at pricing through experience.

About Ron Baker

• Author of Implementing Value Pricing
• Founder of VeraSage Institute
• Graduate of Disney Institute
• Faculty of Professional Pricing Society
• Talk radio show host, The Soul of Enterprise
• Twitter: @ronaldbaker