Pricing strategies: Value-based fees
I’d heard the term ‘value-based pricing’ a few times, but the penny only truly dropped about this pricing strategy when I read ‘The Consulting Bible,’ by Alan Weiss.
Weiss, a formidable force in the world of consulting, warns that as a consultant, using the word ‘price’ diminishes your thinking around your own value and the fee commensurate with the services you provide. In my opinion, the same goes for any service provider, as you’re putting a value on your time, experience, knowledge and skill set – and the way you’ll employ those in the pursuit of improving the client’s circumstances.
Since I wrote Pricing strategies: How to price your services, I’ve been ramping up my professional development reading and putting the theory into practice to rethink and reposition pricing.
Here are some of the ideas inherent in this new thinking for me:
"If a prospect asks me to defend or justify my price, I simply say, ’My fee is...’ and leave it at that."
- The word ‘price’ is more aligned with a product than a human being who offers a valuable service, so when it comes to pricing, I recommend you don’t use the word itself. If you’re selling a service, don’t price yourself. Work on value-based fees.
- It’s not enough to say ‘I’m worth more than that’ – although it’s a great place to start internally. Even better is ‘I’m worth more than that: I’m capable of more than that.’ These words came from blogger Julien Smith, co-author of Trust Agents. They work for me because the balance is smart. You’re worth more because you’re capable of more. You’re worth more to yourself and to your client. You’re capable of more for you and for your client.
- When someone asks you to defend your price, don’t. These days, if a prospect asks me to defend or justify my price, I simply say, ’My fee is…’ and leave it at that.
Want more articles like this? Check out the pricing strategy section.
There’s more to value-based fees, however being aware of the language you use (internally and externally) is an ongoing discipline in standing by your fees. Always balance the value you’re providing the client with the quality of your service.
One big lesson I’ve learned in the last year is that we get what we focus on. Focus on valuing your worth and providing measurable results for your clients and there’s more than a fair chance you will. Focus on defending your price and the quality of service starts to erode: you’ve now become reactive and client outcomes are compromised. It doesn’t serve the client, your brand, or you.
How do you express your value to your clients and prospects? Please share your experiences with value-based fees below.