MIT Sloan Management Review recently featured an article by Andreas Hinterhuber and Stephan Liozu’s entitled “Is It Time to Rethink Your Pricing Strategy?”, which referenced and recommended the approach of value-based pricing
Three pricing strategies are most common: cost-based pricing, competition-based pricing and customer value-based pricing. The authors write: “academic research and our own findings conclude that pricing approaches across industries, countries and companies usually fall into one of [these] three buckets.”
Pricing scholars lean toward customer value-based pricing. As the authors put it, this is often “the most preferable way to set new product prices or to adjust prices for existing products,” and is especially relevant in highly competitive industries. “Customer value-based pricing asks, ‘How can we create additional customer value and increase customer willingness to pay, despite intense competition?’ The subjective and quantified value of a purchase offering to actual and potential customers is the primary driver in setting prices.”
When considering 'business to business' sales relationships, our experience is that many organisations aspire to a value based pricing approach, but don't always find it easy to understand exactly where value lies for their clients. Two main barriers to this may be a clients unwillingness to share this information or the relationship managers inability to elicit this information.
FranklinCovey's approach to 'helping clients succeed' helps to overcome both of these barriers, firstly by focusing on the intent we bring to the client relationship such that the person we are dealing with believes we are on their agenda and that it is in their best interests to explore with us their issues and where the impact / value lies in addressing them. With the client now open to this idea, we then build the skills of mutual exploration so that we avoid the often dysfunctional scenarios of 'telling' or 'accepting' and instead facilitate / structure / challenge the clients thinking as to what their issues are, what evidence is there that these exist, what is the impact of addressing them and what are possible constraining factors.
Those who can do this consistently well, in a manner that seems natural (rather than 'learnt') and in a way that also allows them to respond to any concerns or pushback, can really distinguish themselves in the client conversation. Through this approach they also lay the foundation for effective Value-Based Pricing, in a way that is in the best interests of both parties.
FranklinCovey's approach to 'helping clients succeed' helps to overcome both of these barriers, firstly by focusing on the intent we bring to the client relationship such that the person we are dealing with believes we are on their agenda and that it is in their best interests to explore with us their issues and where the impact / value lies in addressing them. With the client now open to this idea, we then build the skills of mutual exploration so that we avoid the often dysfunctional scenarios of 'telling' or 'accepting' and instead facilitate / structure / challenge the clients thinking as to what their issues are, what evidence is there that these exist, what is the impact of addressing them and what are possible constraining factors.
Those who can do this consistently well, in a manner that seems natural (rather than 'learnt') and in a way that also allows them to respond to any concerns or pushback, can really distinguish themselves in the client conversation. Through this approach they also lay the foundation for effective Value-Based Pricing, in a way that is in the best interests of both parties.
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