Practical Sales Training™ > How To Convert > Value Based Pricing
Value Based Pricing
What Is It?
So price what you do based on what it’s worth, not what it costs you. That’s one of the surest ways to lift your margins. It also does something else just as valuable. It makes your offering sound confident, not apologetic.
Why Does It Work?
It works because it implies certainty while presenting almost no risk to your buyer. “Pay this and you’ll get that result” beats “we charge this and we’ll hopefully get you somewhere close” every time. So charging for the result itself tells your buyer you can actually deliver it. That holds even when the number is higher than they expected. But most people default to charging for hours or materials, then adding a margin on top. Your real worth was never the time or the materials. Instead, it was always your ability to get the result.
How Can You Use It?
Pricing by result means knowing the cost of every alternative your buyer is weighing up. Start with inaction. So what actually happens if they do nothing at all? Then look at delay. So what does it cost them to wait six months before acting? Consider DIY too, since trying to fix it themselves rarely works out cheaper once you count their time and mistakes. Also factor in the FOMO of what they’re missing out on the longer they wait. Then weigh your price against competitors. A lower number from someone else isn’t automatically the better deal. Still, you might struggle to justify a higher price. Or your offering might be genuinely intangible. Either way, it’s worth working through properly before you set your number.
When It Works Best
This works best when your result is measurable. It should also be directly tied to what you did. This also helps when inaction, delay, or DIY clearly cost more than your price.
When It Becomes Dangerous
This becomes risky if you can’t actually explain the value behind your number. As a result, a buyer who can’t see the logic just sees an expensive quote. So they push back accordingly.
Common Mistakes
Falling Back On Cost-Plus
Don’t default to cost-plus thinking out of habit. Pricing by time and materials undersells what you’re actually capable of delivering.
Quoting Without Justification
Never quote a value based price without being ready to justify it. If you can’t walk a buyer through the alternatives yourself, they’ll assume you’re guessing.
Value Based Pricing – An Example
Estate agents base their fees on the value of the property. It’s not about the cost of the work they actually do.
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