Value pricing has nothing to do with what you believe the value you bring is.
If you give a set price for a product at scale, you’re not value pricing. Even if you charge thousands for it.
This goes especially for products and productized services. What some people describe as value pricing is actually a fixed price that has nothing to do with value.
What your product does is not value.
Raising prices and people buying ≠ Value Pricing
The fact that you can raise the price of your product several times, doesn’t mean that you’re charging more based on the value generated. It simply means that either your target market can support your price point (low price sensitivity), you were underpricing (badly) or that they, in fact, value it more and it still justifies the cost of it. BUT it doesn’t matter what YOU believe the value of it is.
Price is subjective
You can’t tell what the value is you’re delivering. You just can’t BECAUSE value is subjective TO THE BUYER. They’re the ones who define what’s the value for them, not you.
You can’t “communicate” the value you bring and set a price.
“My product delivers value” is useless. It can help them do something or bring some kind of result. If your charging the same price to different clients/customers, you’re not value pricing.
It’s like saying that you know exactly how much somebody else loves you. You might know they love you, but you can’t say how much. They can.
BTW, value pricing has nothing to do with what your value proposition is (regarding pricing). They might have the same word in there, but are two different monsters.
It’s pricing based on the value you help create and it’s only defined by the client, regardless of the work you do.
It’s taking a share of what the client thinks will be created, not you. That means EVERY CLIENT has a DIFFERENT PRICE.
If you help bring in 500K, you charge based on that value (500k). If you believe that the value is $20 or $2MM, it’s not relevant. If your client doesn’t quantify it like this (with your guidance), it does not matter.
Who To Follow On Value Pricing
There’s lots of literature about value pricing. Great ones to check are Ron Baker, Allan Weiss, Jonathan Stark or Blair Enns.
Read this post and more on my Typeshare Social Blog