How to Talk about Value-Based Pricing with Your Clients

We often think what we offer people isn’t worth much because what we do comes easy to us. After all, we have spent many, many hours honing our skills and intuitions to a point where it seems like magic to those we work with.

For us, it ends up being a snap of a finger, some clacks on a keyboard, and voila! Problem solved. 

How much is that worth? 

It’s often not that hard for us, and when something doesn’t take Herculean effort who are we to charge premium prices, right? 

Well…

Enter Value-Based Pricing

A few years ago, a friend of mine told me a story about value-based pricing.

A company had a machine that helped create other machines. Suddenly, it stopped working. The people who operated the machine had no idea why. Of course, the machine crashing didn’t stop the workload of orders from coming in. But, without this machine up and running, it was very difficult for them to meet demand.

So they called in a technician who specialized in the repairs they desperately needed. 

Upon arrival, the technician looked over the machine. He opened up doors and checked the control panels. He opened up the side and checked out the moving parts. Overall, he did a quick, yet thorough, inspection of the machine. 

Within about 5 minutes he said, “Aha, I know what the problem is.”

He then pulled out a wrench, struck the machine once near the bottom, and the machine came back to life.

The manager standing there was in awe. “That’s amazing!” He said.

Thank you, the mechanic replied. And then handed him a bill for $5,000.

“What?” Gasped the manager. “You expect me to pay $5,000 for 5 minutes worth of work?”

“No”, the mechanic replied. “I expect you to pay $5,000 for the 20 years worth of working experience with these machines that enabled me to determine precisely what needed to be done and get your line up and running once again within 5 minutes so that your company could stop losing money.”

I think everyone who sells services should hear that story so they can really get a sense of how important and valuable their expertise is to clients.

Another Perspective on that Value-Based Pricing Story

While I think that’s a wonderful story for service-based business owners, I do NOT think it is a good story to tell potential clients so that they understand why you charge premium prices.

Let’s think about that story from another perspective.

It begins with a manager who signs time cards every single week so that workers can get paid for work by the hour. The managerial mindset is such that it is used to thinking in terms of how many hours a person works, and even how many hours of overtime a person is entitled to for working an extra amount during the week.

So the bottom line from a managerial perspective is this. The mechanic still only took 5 minutes, which on a time card may be rounded up to 15 minutes. Keep in mind the manager probably worked her way up into her position from the ground floor. She has many years of experience and is also considered an expert in her field. 

If we do the math, it’s safe to say she doesn’t get paid $1,000 per minute for her expertise. Why should the mechanic?

If you were to tell this story to someone who is in her position, how demeaning and devaluing might that story seem to her? That’s a surefire way to alienate a potential client. 

Here’s How You Communicate the Value of Your Expertise so You Can Charge Based on Value

When you communicate the value of what you do and the price of your services, you want to make sure that you’re communicating in a way that connects with the perspective of your ideal client.

If you are trying to help a client feel more comfortable about your pricing, consider this…

Let’s say that I am selling you a program for $1,000, and you are an ideal client.

$1,000 sounds like a lot of money, right? And if you think $1,000 is a lot of money, that means it’s a lot of risk. After all, you don’t know whether it will be worth it.

Now, let’s try to minimize that sense of risk by focusing on the potential financial benefits of the program.

Here’s a question I might somehow ask…

“How many of your main programs do I have to help you sell in order for you to start getting a return on your investment?”

If your main program sells for $350, the answer is three. If my $1,000 program helps you to sell just three of your programs that you would not have otherwise sold over the lifetime of your business, then my program has paid for itself, and…

Anything after 3 is sheer profit to you.

Now, with that in mind, how do you feel about spending $1,000 on my program?

Once you know that you only have to sell three of your programs to make your money back, the risk suddenly seems quite small. You can easily imagine seeing the positive effect my program is going to have on your bottom line every single month.

By connecting my pricing to the way you generate revenue, I decrease risk and greatly increase the possibility of making a sale.

This is how you communicate value to potential clients in a way that resonates with what they want and minimizes risk. 

So, be mindful of how you present your value-based pricing so that you can avoid turning away ideal clients and instead transform them into actual clients.

What Next?

Now that you understand why value-based pricing is so important and how to communicate it to your potential clients, it’s time to put it into action.

There’s no reason for you to try to do it by yourself. Your next step is to get on Heather’s calendar for a 15-minute Clarity Call. On that call you will get help finding your direction to help you reach your business goals.

This call is free, and since you are not obligated to sign up for services, there’s absolutely no risk for you. So, click here, pick a spot on the calendar, and get ready to get moving forward in your business.