Find out how to take value based pricing from a concept to a real way to price your website services.

1. Value Pricing
(How to use it to
price websites)
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The different ways of ‘pricing’

3. • Hourly billing
• Fixed pricing
• Value pricing
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The different ways of ‘pricing’

4. • It’s simple.
• Erm… Yeah, sorry, that’s it.
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Why is hourly pricing good?

5. • It’s simple.
• There’s a conflict of interest.
• You get paid less for working faster.
• Focuses on the wrong thing.
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Why is hourly pricing bad?

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The problem with hourly billing

7. “If you bill by the hour, there is an
artificial limit on your income.””
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The problem with hourly billing…

8. • It’s relatively easy.
• Client can choose what they can afford.
• Clients love it.
• Rewards you for faster work.
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Why is fixed pricing good?

9. • It doesn’t take into account affordability.
• It doesn’t take into account ROI.
• It’s still focusing on inputs.
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Why is fixed pricing bad?

10. To build this website, it will cost you £2,000.
If you invest £2,000 in a new website, it will
enable a potential return of £50,000.
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It’s all about semantics

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What is value?

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What is value?
Does anyone know what the technical
meaning of value is?

13. “The maximum amount someone is
willing to pay for a product or service.”
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What is value?

14. (Revenue - Cost) / x% = Value
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What is value?

15. Value pricing is a way for me to
increase my prices…
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What is value?

16. Value pricing is a way for me to
increase my prices…
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What is value?

17. “Value based pricing isn’t about you talking about your value.”
“Value based pricing isn’t about you feeling more valuable and
therefore pricing higher.”
“Value based pricing is finding the right price for the value that’s
delivered when that value is appreciated and understood by a
customer.”
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Billing is not the same as pricing…
Chris Lema

18. Believe that you create value
Know how to discover value
Understand the power of options
Realise billing/hourly rates ≠ pricing
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To use value pricing, you need to…

19. “Pricing is different than billing. Billing is
something that happens after the fact; pricing
is something that happens in advance.””
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Billing is not the same as pricing…
Kirk Bowman

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Believe you create value

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Discovering Value

22. It’s time for that question…
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But before that…

23. What’s your budget?
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But before that…

24. You can:
Increase things
Reduce things
Improve things
Create things
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Ways you can create value

25. Why now? Why not 12 months ago? Why can’t you wait 12 months?
What will this website let you do that you can’t do now?
How does success look like in 6/12/18 months time?
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The power of questions…

26. However…
Get used to redirecting questions.
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The power of questions…

27. The Magic Question
“Let me repeat to you what I just heard and let me make sure I got it
right.”
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The power of questions…

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Anchoring and Options
thepolitic.org

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Anchoring and Options

30. As humans, we do not have the ability to judge
the value of something in isolation.
We determine value by comparing and
contrasting one thing to another.
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Anchoring and Options

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Anchoring and Options

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Anchoring and Options

33. “Anchoring is a cognitive bias that describes the
common human tendency to rely too heavily
on the first piece of information offered (the
"anchor") when making decisions.”
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Anchoring and Options

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Anchoring and Options

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Options
GiuseppeCostantino/Shutterstock

36. Things you can create options with…
Time (as in duration)
Terms (as in payment terms)
Tailoring and customisation
And much, much more…
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Ways you can create value

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Start Pricing

38. • You need to believe you create value.
• You need to discover value.
• You need to create options.
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Start Pricing

39. Meet James
He runs a small IT consultancy
His target market is SMEs with 5+ staff
The average customer spends £180p/m
Goal of 20 new support contracts in 2015
Average lifetime of a client is 5 years
Average profit margin is 70%
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An example…

40. (New Customers x Average Revenue) x 12 = ARC
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Example
ARC = Average Revenue per Customer

41. (20 x £180) x 12 = £43,200
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Example

42. £43,200 / 100 * 70 = £30,240
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Example
Revenue –> Profit Margin = Profit

43. £30,240 / 10% = £3,024
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Example
Value per year * Average Lifetime of a Website
£3,024 * 3 = £9,072

44. Questions?
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Thank you for listening!