Ron Baker has authored multiple best sellers and used to be a CPA. Here are some great takeaways from an interview he did with Chris Do of The Futur. The information is applicable to pretty much any business, whether a marketing agency, contractor, logo designer, or even selling a book.
A great example scenario about a landscaping company offering value-based pricing
1st guy: price on inputs: $40/hr – leaves me with more questions than answers
2nd guy: price on outputs: $100/mo – defined scope of work
3rd guy: price on outcomes – learn the customer, offer 3 options:
$150/mo for basic maintenance (like the 2nd guy)
$225/mo for bringing yard up to neighborhood standard
$300/mo best curbside appeal in the neighborhood and we’ll upgrade things along the way over the months and years.
Value’s subjective. He doesn’t want to mess with the lawn and wants to sell his house in a couple years, so he chose option C even though it was three times the price. His neighbor, who loves yard work, might want a defined scope of work and wouldn’t pick the highest plan.
Prescription without diagnosis may be considered medical malpractice.
The 2nd law of medicine
Peter Drucker: If all we’re doing is solving someone’s pain points, we’re just reverting back to status quo; we’re not progressing them. This landscaper is helping achieve dreams—not just problem solvers but possibility pursuers.
If you frame and articulate your value well, you can charge premium prices. When you’re providing transformations, the customer is the product; it’s not about my yard work. Future desired state.
If you’re not offering options, you’re not allowing the customer to change their frame of mind from “should I work with you?” to “how should I work with you?”
When you’re a specialist, you attract business from all over, not just your local area.
Earning is Serving
It’s the most noble thing in the world to be able to serve a stranger; it’s like a miracle. Love of money is the root of all evil, not getting paid more. It’s a reflection of how much value you’re able to provide, assuming a free market / no price fixing.
We’re defined by the services we don’t have and the customers we don’t have. You have to specialize and be known for something, which also allows you to charge higher prices.
If you say you cannot charge fixed prices based on the value of your outcomes, maybe you aren’t as experienced as you think. I don’t want to go to a doctor who dabbles in my condition. I’m willing to travel to another state for a specialist, but for the basics I just look up whichever doctor is nearby.
I’ve rarely seen someone go out of business because their pricing was too high.
We’re living in the subscription economy
Within 5 years, everything will be available as a subscription.
Even if your business does not move to subscription, you’ll still have to deal with it since your competitors will offer it.
When you subscribe, you move from transactional to relational. You can subscribe to a medical firm and anything we offer is included. Anything we don’t offer isn’t covered and we’ll refer you out, but we’re continually expanding what we’re offering and your price doesn’t necessarily change.
Stop trying to look at the math of the moment and look at the lifetime value of the relationship. It gives the customer convenience and peace of mind.
It will reward your business, essentially turning your business into an annuity for you.
With a subscription, it puts the relationship at the center. Psychologically, it’s completely different to subscribe to a service; it locks in loyalty.
Value-Based Pricing by Ron Baker
Ron Baker has authored multiple best sellers and used to be a CPA. Here are some great takeaways from an interview he did with Chris Do of The Futur. The information is applicable to pretty much any business, whether a marketing agency, contractor, logo designer, or even selling a book.
Table of Contents
A great example scenario about a landscaping company offering value-based pricing
Value’s subjective. He doesn’t want to mess with the lawn and wants to sell his house in a couple years, so he chose option C even though it was three times the price. His neighbor, who loves yard work, might want a defined scope of work and wouldn’t pick the highest plan.
Peter Drucker:
If all we’re doing is solving someone’s pain points, we’re just reverting back to status quo; we’re not progressing them. This landscaper is helping achieve dreams—not just problem solvers but possibility pursuers.
If you frame and articulate your value well, you can charge premium prices. When you’re providing transformations, the customer is the product; it’s not about my yard work. Future desired state.
If you’re not offering options, you’re not allowing the customer to change their frame of mind from “should I work with you?” to “how should I work with you?”
When you’re a specialist, you attract business from all over, not just your local area.
Earning is Serving
It’s the most noble thing in the world to be able to serve a stranger; it’s like a miracle. Love of money is the root of all evil, not getting paid more. It’s a reflection of how much value you’re able to provide, assuming a free market / no price fixing.
We’re defined by the services we don’t have and the customers we don’t have. You have to specialize and be known for something, which also allows you to charge higher prices.
If you say you cannot charge fixed prices based on the value of your outcomes, maybe you aren’t as experienced as you think. I don’t want to go to a doctor who dabbles in my condition. I’m willing to travel to another state for a specialist, but for the basics I just look up whichever doctor is nearby.
I’ve rarely seen someone go out of business because their pricing was too high.
We’re living in the subscription economy
Within 5 years, everything will be available as a subscription.
Even if your business does not move to subscription, you’ll still have to deal with it since your competitors will offer it.
When you subscribe, you move from transactional to relational. You can subscribe to a medical firm and anything we offer is included. Anything we don’t offer isn’t covered and we’ll refer you out, but we’re continually expanding what we’re offering and your price doesn’t necessarily change.
Stop trying to look at the math of the moment and look at the lifetime value of the relationship. It gives the customer convenience and peace of mind.
It will reward your business, essentially turning your business into an annuity for you.
With a subscription, it puts the relationship at the center. Psychologically, it’s completely different to subscribe to a service; it locks in loyalty.
Common services don’t command uncommon prices.