Ed and Ron discussed an email Ron received from listener Byron Johnson, a CPA in Canada. This episode explores the many differences in the business model of Value Pricing vs. the subscription business model. They are entirely different, and time will tell how well the professions adopt this new model.
Hi Ron,
You were kind enough to share some resources with me 2-3 years ago after I left a firm and started my own firm. I’ve read your Implementing Value Pricing book and I’m a regular listener to TSOE (yes, the Greg Kyte version). I am a fan. Thank you for all of that.
I’ve been wrestling with a thought and wanted to reach out to see if you might have a brief comment. I’ve heard you refer to subscription pricing as VP 2.0 on several occasions. I’ve also heard you indicate a shift (at least I think it’s a shift) from pricing the customer to pricing the portfolio. I’m just really trying to figure out and implement this whole pricing thing better.
It just struck me recently that I don’t think I would like to be value-priced in the true sense of the term. An anecdote to illustrate: My wife and I are currently considering some significant renovations on our home, and we’ve solicited a couple of quotes to do so. Now, I have no objection to receiving quotes that vary. We may have more confidence in a contractor with a higher quote than one with a lower quote. It then becomes our task to evaluate at what point the higher quote becomes too expensive relative to the value received. No harm, no foul with differences there.
But if I knew that the contractor I like (the higher priced one), increased the price of my quote over the quote he gave my neighbor for doing exactly the same job (hypothetically) just because he perceived I valued it more or I had more resources, or whatever, I think I would be royally ticked. Shouldn’t the price he is willing to do the exact same thing for two parties be exactly the same, and then it becomes the duty of those parties to determine if they value it or not and subsequently pay that price or not?
It just strikes me that the more we deliver a similar service, the more that price should be consistent across customers. Maybe that is what you are getting at when you talk about pricing the portfolio on a subscription basis? Maybe there should be a little more consistency knowing that you are going to win on some and loose on others, but that overall the portfolio is good.
It is almost like with subscription pricing there is a general pricing grid that, yes, has options, but it is more or less the same options for homogenous clients. Maybe that is appealing because of its simplicity.
My partner and I are just realizing how much mental energy we are exerting pricing new clients instead of simply having a “price list” that we go to without thinking (too much) about it.
The interviews you’ve had with Dr. Paul Thomas have resonated with the simplicity that I refer to here. Each individual pays a certain price. No playing favorites. Some will require more attention than others. Because of this, they will lose money on some.
It has just struck me with this realization that customers/clients don’t want to be value-priced and they would likely object to it if they knew they were. I think I’ve made some mistakes pricing some prospects higher than others (for essentially the same work) and then not converting those prospects to clients.
Anyway, this may be mostly a jumbled ramble. If you care to share any thoughts, I’d be most appreciative.
Thanks,
Byron A. Johnson, MSc, CPA
Canada
Bonus Content is Available As Well
Did you know that each week after our live show, Ron and Ed take to the microphone for a bonus show? Typically, this bonus show is an extension of the live show topic (sometimes even with the same guest) and a few other pieces of news, current events, or things that have caught our attention.
Click the “FANATIC” image to learn more about pricing and member benefits.
Bonus Episode 103, in which Ed tries to convince Ron to leave California, yet again, features conversations on several articles including: