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How Value-Based Pricing Works For You Part 2

Benefits of Value Based Pricing at a Glance

  • The end-client has a clear idea of exactly what they get for their money for a clearly defined job. The client gets peace of mind.
  • It improves the relationship with the end-client – fees do not creep up due to more time being taken on a specific job.

 

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  • It allows other services to be “packaged up” and sold as clear definable “add-ons” a client can choose to buy. This simplifying and clarity helps the client identify, from a complex set of services, what is useful to them. Thus it is easier to attract clients to additional services and then sell to them.
  • Establishing a value-based fee requires accurate knowledge of the client needs, which mandates a pre-project meeting with a client. This collaborative approach helps build a positive relationship with a client, giving you a chance to take on the role of ‘trusted advisor’ rather than mere service provider.

 

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Obstacles to Value-Based Pricing

Value-based pricing methods are not traditional pricing methods, and they take some getting used to, both as a firm, and for your clients. When attempting to implement this method of pricing, some of the obstacles you may face include:

  • Internal resistance: Firm-wide adoption of this pricing method is necessary in order for it to be a success. Training and ‘reprogramming’ staff is an initial investment needed and can meet with resistance, particularly as cost-based pricing (hourly rates) are the pricing method taught at university and the established norm.
  • Client discomfort: Despite the premise of value-based pricing being to set a rate that meets the customer’s value perception, some aspects of value-based pricing may seem unfair to a client, particularly as you change from one method to another. The best ways to assuage this discomfort is to prove to the customer they are getting their money’s value: increase communication with them, improve your availability, your responsiveness and ensure the quality of your work and improve visibility of senior partners.

 

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  • Finding the value price: Price setting can be difficult if the proper information is not available. This is where engagement letters must be specific; then anything outside the scope of the initial engagement letter becomes an add-on and can be priced as such, without a project running at a loss. In a case where information is scarce, an engagement letter should cover what the project will encompass, as well as what it will not.

While many firms resist using a value pricing method, many still are embracing it, and feeling the rewards of not only increased value from their work, but a stronger and more open relationship with clients. What is stopping you from using value-based pricing in your firm?

 

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The End

BOSS (Back Office Shared Services Pty Ltd) is Australia’s premium outsourcing provider supplying well-trained high-quality virtual accountants, outsourced accountants & bookkeepers. To discuss your needs and how we can help, Book a Consultation NOW!

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