Don't Cut Off Your Nose To Spite Your Face

For the final blog in this series, I need to recap a bit more Economics theory.

One well known diagram is the 'Cobb Value Curve'.  Don't worry, I won't attempt to reproduce it.  I'll just describe it in the least detail sufficient to make my point.

This curve plots 'Relative value added' against 'Volume of work available'.  Briefly, there aren't too many jobs available with the potential to add enormous value, but there are lots out there where you can add a small amount of value.  Anyhow, this smooth curve has four key sections:
* 'Nuclear' event - Distinctive, high value - Averts a major catastrophe or
   has a significant impact - Approximately 4% of a market
* 'Experiential' services - High risk and high impact - The Professional is
   selected for their effectiveness - Approximately 16% of a market
* 'Brand Name' services - May be routine for the Provider but is important
   for the customer - This work goes to Professionals with well established
   reputations - Approximately 20% of a market
* 'Commodity' services - Stuff that customers expect any Professional
   to be capable of - Approximately 60% of a market

Your customer's position on this curve is a clue to their price sensitivity.  And their position can change!  Most Professional Service Providers have some customers at least in the 'Experiential' bracket.

“Better to focus on the total package of value your customer
  can derive”

The mistake is to treat all customers equally - which a universal hourly rate would do - no matter where they are on the curve.  Once again, your goal must be to charge different prices for different value.

Another implication of the curve is that concentrating on raising the price of any one low value service will drag the prices of other low value services upwards with it, eroding differentiation.  Trying to focus on premium value (and therefore price) work leaves you in a very narrow market.

Better instead to focus on the total package of value your customer can derive rather than itemising your services.  Quoting a fixed fee for a 'bundle' that includes a range of services makes it easier to command higher prices for greater value.

If you agree with these thoughts and would like to find out more about pricing your services on the value your customers get out of them so you can make sales without selling and get paid what you're worth, visit www.sws3.co.uk to download 30 more free practical ideas you can implement straight away in your business.

Service providers who charge for their time or their materials, or whose prices are influenced by their competitors can find out how to get paid what they're really worth at www.sws3.co.uk