Value-based pricing myths for designers

Value-based pricing is not for everyone and it's not the easiest pricing principle to master. Because it's not something that not everyone completely understands, it can be seen as an attempt to inflate prices when dealing with high-end clients.

But value-based pricing is real and we all live with it day to day in various forms. Even supply and demand is an example of value-based pricing. It's also the reason why a bottle of soft drink cost less from a supermarket than a small glass at a restaurant does. While there are other factors here that affect the cost (supply chain, mass stock purchasing etc) it does not account for the total price difference. So why do we accept this? Because the value being provided is not the same.

This value difference could come from many areas such as convenience, service or stature.

Value-based pricing is usually attached to charging more (most of the time this is the goal of the person using the technique) but it works both ways. For example, if you're working for someone who sells cupcakes at a local farmers' market, you can't offer the same value to them as you can when working with a large chain such as Krispy Kreme. This is because the impact that you make for each example will not be the same.

If you're using value-based pricing correctly, when the value that you offer someone is small, you charge less.

What no one mentions about Value-Based Pricing:

Clients come to you with all different budgets and all different pricing structures in mind. They might think you should charge for the time you spend, they might think you should charge competitively in relation to the work you do within the market. But no client is ever basing their thoughts on budget, in line with the value of the outcome.

This is something that you will need to help them see. Many people will work this out for themselves when you focus your questions around the cause of their problems, and the end goal for their outcome.

Value-based pricing is about working with someone to uncover what's important to them, and what value they place on the result and using that to guide the budget.

Value is not Return on Investment

People can get scared away from Value-based pricing by thinking they need to prove ROI in all situations. But they don't. Value is subjective, not only does it change from person to person but it changes with time. What people need, want and desire, is not set in stone. Not everything of value is linked to a financial return.

When a house is on fire, is the most valuable thing people grab always the most expensive? Nope.

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