“Getting the job done”

October 14, 2022

In this issue, you’ll learn:

It is best to charge based on how much value you provide.
That doesn't work for every service or industry, and it also depends on how strong your brand is and how much you know.

Time to read: two minutes.

Types of value propositions

Today, we will talk about what's in bold in the list below.

Price
Cost reduction
“Getting the job done”
Risk reduction
Customization
Accessibility
Convenience/usability
Performance
Design
Newness
Brand/status

“Getting the job done”

When your business model is directly linked to how your target customer reaches their goal and does well in its operations.

It is well known that top consulting firms use this model.

They call it pay for performance.

Pay for perfomance

We negotiated a fee based on the client's projected savings after we helped them cut their production cycle time by 20% and their rework by 50%; if those savings don't materialize, we only collect our 50% base fee.
If you hire through a recruiting firm, expect to pay 25% of your new hire's salary in the first year.
Whenever one of Rolls- Royce's engines is put into service, the airline that operates the plane pays a fee.

'Power by the Hour': Can Paying Only for Performance Redefine How Products Are Sold and Serviced? - Knowledge at Wharton — knowledge.wharton.upenn.edu

Imagine paying for your car only when it works. Or your television. Or even your high-end toaster. That might sound far-fetched, but it could be the future model for purchases requiring service over time. According to research by two Wharton professors of operations and information management, Morris Cohen and Serguei Netessine, and doctoral student Sang-Hyun Kim, this new approach to service supply chains is already reshaping customer-supplier relationships in defense and aerospace contracting under the name "Performance-based Logistics" (PBL). It could have implications for certain retail sectors as well.…Read More

Does it work for every business model?

No.

The exceptions to this rule are executive coaching, training, facilitation, research-based consulting, and specific types of subject expertise consulting.

It's also a bad idea if you have first-hand knowledge that the client won't follow your advice because of barriers like culture or red tape.

Wrap-up

Establish your prices in accordance with the value you bring to your customers.
That isn't a good strategy unless you have a really strong brand and a lot of market knowledge, and it doesn't work for every service or sector.