it’s value, not time, that matters

theory-practice-yogiFrom the amazing book by the creator of Freshbooks called Breaking the Time Barrier.

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“I guess I’m not sure what you mean by value.”

“The value of what I do,” Karen said, “is based on the impact I can have on my client’s business. Impact is how they value my services. So I look at pricing from their point of view. They don’t hire me to design a website for the sake of designing a website. They hire me to design a website that’s going to help them from their perspective—it’s clear I’m not selling time. Instead, I’m selling a solution that is going to make an impact for my client and achieve some business objective.”

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I’m not a collection of hours,” Karen said. “I’m the accumulation of all my skills and talents. I’m wisdom and creativity. I’ve stopped seeing myself as a punch card. My clients don’t see me that way either. Yes, sometimes, I’ve had to change my client’s mind-set. But it starts with selling time. The best thing you could do for yourself is to get the concept of time out of your head.”

It puts you and the client on opposite sides of the table. If you’re selling hours, it’s in your best interest to take longer, to bill more hours. But your client is interested in getting solutions that work as promptly as possible. What if you work quicker for one client than another but deliver the same value. Should you penalize the client you worked longer for? If you’re slow, it’s not their fault.”

“And if you get quicker at something,” Steve said, “which was happening with me, you should get rewarded, right? But I was charging less if it took me less time.”

On Pricing Theory

Recommended reading for pricing theory today and how it communicates value (yes this relates to PR) is Seth Godin’s Post "On Pricing".  That post stems from Joel on Software’s post "Price as Signal".  In particular Seth’s close of

Which leads us to the wisdom of Jeff Bezos. There are two kinds of companies, Jeff says. Companies that work to lower prices (like Amazon, most of the time) and companies that work to raise prices (like the music industry, all of the time).

Having attended the O’Reilly Emerging Technology Conference, the only fortune 500 CEO that will be sitting next to you through the sessions is Jeff Bezos.  Not flying in to talk and leave, but attending.  Studying.  Working to lower prices.  Overall not a bad thing, and speaking as a guy with a book problem, I appreciate Amazon.

I like studying pricing theory, well not really, it just became a necessity when running a company so there it is.  The one that makes the most sense to me is the Value Equivalency Line concept.  Crossing this with Geoffrey Moore’s concept of technology company marketing crossing the chasm creates an interesting set of thoughts.  And a pricing model that does work, although it may be based on luck.  So much of business is actually based on luck, we just don’t like to admit it.