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Rethinking Value-Based Pricing for B2B Service Based Businesses

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Rethinking Value-Based Pricing for B2B Service Based Businesses

By , March 11, 2024
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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.

Darryl Bates-Brownsword

Darryl Bates-Brownsword

CEO | Succession Plus UK

Darryl is a dynamic, driven Business Mentor and Coach with over 20 years of experience and passion for creating successful outcomes for founder-led businesses. He is a great connector, team builder, problem solver, and inspirer – showing the way through complexity to simplicity.

He has built 2 international multi-million turnover businesses; one now operating in 16 countries. His quick and analytical approach cuts through to the core issues quickly and identifying the context. He challenges the status quo and gets consistent, repeatable and reliable business results.

Originating in Australia, Darryl’s first career was as an Engineer in the Power Industry. Building businesses bought him to the UK in 2003 where he quickly developed a reputation for combining systems thinking with great creativity to get results in challenging situations.

A keen competitive cyclist, he also has a B Eng (Mech) Engineering and an MBA.