Fixed pricing is not value pricing

value pricing Aug 01, 2016

Fixed pricing is a bad idea – it’s not value pricing

Fixed pricing isn’t just a bad idea. It’s a really, really bad idea.

Why?

This video explains why.

When I started teaching pricing back in 2000 almost every accountant priced based on time. In the last 15 years or so attitudes amongst accountants changed. They realised the old way no longer worked and that a move to value pricing was more sensible.

That’s great.

But that’s not necessarily what has happened.

Struggling with the concept

Many people are struggling with the concept and instead, time and time again I see fixed prices.

Bad idea remember?

Ok, so it’s better from the customer’s point of view because it’s no longer based on time. Except it is. It’s based on the accountant’s or bookkeeper’s best guess as to how long a job will take.

It has nothing to do with value to the customer.

It’s even worse when someone has a single fixed price. Let’s say £400 for tax returns. Sounds pretty fair? Except it’s nearly always the wrong price. I guarantee it.

Disadvantages of a fixed price

Think it through. A client meets with you and has an idea of what they want to pay. What are the chances that the figure in their head is the same one as your fixed fee of £400 and you both come away from the meeting happy?

Pretty unlikely.

So there is now no room to move. They come into the meeting with the price in their head that they are happy or able to pay. It will most likely be either higher or lower than what you charge through your fixed price fee structure.

Now you face two scenarios – both of which mean you lose out.

Losing out in both scenarios

If it’s too high, you’ll lose the sale. They will go elsewhere. Too low and you’ll realise that whilst the client may be happy you are not. You realise that they would have spent more.

You have to recognise that in life every single client is unique. Everybody values things completely differently to the rest. Remember when you have that single fixed price it’s always the wrong price.

Instead you have to have a price based on value.

And that differs from customer to customer.

Software-based tools such as Cloud Pricing enable you to price in front of the client. The client is involved in the whole process and they pick the package that’s just right for them

They choose the price for them.

They feel cherished and not pigeon-holed.

You meanwhile end up selling more services. That’s value pricing.

 

Every month I provide free online training helping accounting professionals get results from value pricing. If you want to get access to that free training click here to register your place on the list of people I invite.

Wishing you every success on your pricing journey

Mark Wickersham
Chartered Accountant, public speaker and #1 best-selling author of
Effective Pricing for Accountants

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