Pricing on Purpose: Creating and Capturing Value - … · Pricing on Purpose: Creating and...
Transcript of Pricing on Purpose: Creating and Capturing Value - … · Pricing on Purpose: Creating and...
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Ron Baker, Founder VeraSage Institute
Twitter @ronaldbaker
Pricing on Purpose: Creating and Capturing Value
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“The business enterprise has two -- and only two -- basic functions: marketing and innovation.
Marketing and innovation produce results; all the rest are costs. Marketing is the distinguishing, unique function of the business."
Peter Drucker
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What are you really selling?
What are your customers
really buying?
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Simon Sinek, Start with Why www.ted.com
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“The customer never buys a product. By definition the customer buys the satisfaction of a want. He buys value.” - Peter Drucker
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Dan Ariely Professor of Behavioral Economics
Author, Predictably Irrational
“You are what you measure.”
How often do agencies track the following?
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The First Law of Pricing: All Value is
Subjective
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Value = The maximum amount a consumer will pay for an item
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$0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
Cost
Price
Value
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Confusing Cause and Effect
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Cost-Plus Pricing
Value-Based Pricing
Customer Value Price Cost Service
Service Cost Price Value Customer
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Eight Steps to Implementing Value Pricing
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Implementing Value Pricing
Eight Steps at a Glance
1. Conversation with Customer
2. Pricing the customer, not the services (CVO/Value Council)
3. Developing and pricing options
4. Effectively present options to customer
5. Option selected codified into an Fixed Price Agreement
6. Proper Project Management
7. Scope creep, utilize Change Orders
8. Conduct Pricing After Action Review
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“Language was invented to ask questions. Answers may be given by grunts and gestures, but questions
must be spoken. Humanness came of age when man asked the first
question. Social stagnation results not from a lack of answers but from the absence of the impulse to ask
questions.” -Eric Hoffer, Longshoreman Philosopher
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Implementing Value Pricing 1. Conversation with customer
Not: “What do you need?” But rather: “What are you trying to accomplish?”
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Implementing Value Pricing 1. Conversation with customer
Listen > Talk
Opening: “Mr. Customer, 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?”
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The Benefits of Discussing Value
1. Creates trust
2. Aligns incentives
3. Differentiates you from competition—how you sell is indicative of how you solve
4. Frames your services as an investment, not an expense
5. Inspires action
6. It improves communication since it’s focused on results
7. It lowers client’s price sensitivity
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The Second Law of Pricing: All Prices
are Contextual
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Implementing Value Pricing 3. Developing and Pricing Options
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Rational vs. Irrational
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Behavioral Economics
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Insert Dan Ariely Video here
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1 Yr Sub Price Mkt Share
Web only $59 16%
Print only $125 0%
Print & Web $125 84%
1 Yr Sub Price Mkt Share Web only $59 68%
Print & Web $125 32%
42.8%
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Anchoring
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$1,000 Omelette
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Framing
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Options Options: factors to consider ¢ Timing ¢ Terms ¢ Talent ¢ IP Ownership ¢ Degree of customization ¢ Level of service or access
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“We’re not in the business of selling time—we sell momentum for your business. Do you want to haggle over hours, time, and costs, or do you want the ideas that will give momentum to your brand?”
Jeff Hicks, CEO
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Thank You!
Twitter @ronaldbaker
VeraSage website/blog www.verasage.com (707) 769-0965