In the world of small and medium-sized businesses (SMEs) offering services to other businesses, how you price your services can greatly impact your relationship with your clients. While value-based pricing has been praised for its fairness, it may not always be the best fit, especially for services that rely heavily on expertise. In this article, we’ll take a closer look at value-based pricing, questioning if it’s the right choice for B2B businesses, and explore other pricing approaches that focus more on long-term relationships rather than short-term gains.
Rethinking Value-Based Pricing
Thinking about the Seller
Value-based pricing lets sellers charge based on how valuable their service is perceived to be. But does this approach always benefit the buyer? It raises concerns about whether the seller is taking on any risk. We’ll compare this to pricing goods, where buyers decide what something is worth, and examine how this might strain client relationships.
Letting the Client Decide
Product-based pricing empowers clients to determine the value of what they’re buying, similar to how they choose between different products. This contrasts with value-based pricing, which emphasises aligning the price with what the client thinks the service is worth.
Questioning What’s Delivered
We’ll look at the risk buyers face when they don’t get the value they expected, especially if the seller doesn’t share in that risk. Promising too much and not delivering enough can hurt client relationships, showing why it’s crucial to deliver on what’s promised and not rely solely on perceived value.
Looking at the Future
Balancing Risk and Reward
There’s a gap when suppliers charge for value but don’t share the risks involved. This can damage trust and loyalty, highlighting the need for a more balanced approach that considers the challenges clients face.
Thinking About Reputation
Profiting from scarcity, like charging more during a crisis, can raise ethical concerns. Long-term relationships aren’t built on such practices, as clients may question the integrity of the supplier and their commitment to mutual success.
Other Ways to Price
Subscription or Retainer Model
For services where clients need ongoing access to expertise, a subscription or retainer model shows a commitment to their success over time. This promotes transparency and a shared focus on long-term goals.
Project-Based Fees
When clients need specific solutions, charging a fee for the project provides transparency and fair compensation without tying everything to the outcome. Recognising the value of specialised knowledge, both subscription and project-based models can come with a premium to ensure providers are properly rewarded.
In summary, in the complex world of B2B services, a one-size-fits-all pricing approach might not be the best for building lasting relationships. While value-based pricing has its place, it’s important to consider other models that prioritise long-term client partnerships, transparency, and a shared commitment to success. By aligning pricing with the real value delivered, service providers can build relationships based on trust, ethics, and a journey toward mutual success.
