11/17/2023 0 Comments Value based pricing approachThere is very little leeway in this pricing model to scale your prices and to suggest extra services, as the client will only perceive extra hours, not extra value. Who are they going to call when they have a problem, when they are aware that every transaction is going to be billed by the hour or minute? They are more concerned about the best service they can get, or rather the value you add to their business. The funny thing is, clients are not always expecting time based pricing. Someone is always willing to offer the same service for less.The only way you can increase revenue, is to increase your hourly rate, and that always leads to sticky conversations with your customers, whenever the yearly increase in rates comes around.Improvement in quality of staff does not, therefore, translate into increased revenue. There is no incentive for you to work faster and smarter, thereby suffocating your skills development and that of your staff. You are tempted to work longer and dumber, because it equates to more hours and more money.The client will hesitate to call you if he has a problem, or an extra service he requires, because he automatically knows it will take more time and hence more money.The client will always want you to work less so he can pay you less. The faster and better you work, the less you get paid.So what exactly is wrong with time based pricing? With the growth in innovative economic theory in modern times, the concept has been formalised and expanded, and today holds the only realistic method of increasing revenue for service providers like accountants. Whenever someone supplied a service that was calculated on the result, or the perceived value to the customer, irrespective of how much time it took, you had value based pricing. Value based pricing has also been around for a long time, albeit in a different guise. One of advantages for clients is that they are comparing apples-to-apples, which makes life easier for them, and further ingrains the concept. Time based pricing has been around since man invented clocks, and as such, is so deeply ingrained in the minds of both the supplier of services and the customer, that it is difficult to contemplate another way of doing things. Value based pricing, like being an accountant, is a continuous learning process, and through that learning, one continuously adds value. We will also touch on some of the possible pitfalls you should be alert for when implementing value based pricing. Now we are going to go into pricing in much greater detail, to determine why you should switch to value based pricing, and we’ll explore some guidelines as to how to start implementing the concept. We have discussed the concept of the value chain we have completed the first step by starting to rethink our services and we have looked at how to put them into packages or bundles. Value Based vs Time Based Pricing: An OverviewĪs we have discussed in earlier posts, the journey to value based pricing is fraught with many pitfalls for the unwary.
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