How to Create a Bold, Daring and Utterly Irresistible Pricing Model

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There’s a traditional, somewhat logical, pattern to how business has always been done. The seller describes a product or service, promise benefits, maybe even paints a rosy picture of the prospective buyer’s life with said product or service, and asks the buyer to pay a set price in order to acquire it.

While this how it has always been done, there are a couple of inherent problems with this model, particularly when it comes to acquiring a fairly new product or service with little history or buyer success to point to as proof of promised results.

Problem #1

The biggest problem is that the buyer is left to shoulder the entire burden of risk. What if they don’t get the promised results? What if it isn’t what they need? What if, heaven forbid, it’s not as good as the commercial suggested?

Now, some of this doubt can be dismissed with guarantees, but still, the buyer must wade through the process.

Problem #2

Because we’ve all experienced problem #1 at some point, we’re reluctant to believe the claims and value propositions of something that really may be the answer to our challenges. In some cases, we forgo products and services that we need because we just aren’t sure the price risk outweighs the value or results promised.

I believe that one of the most effective ways to address this is to look at using a fee for value or results based pricing model, particularly in the case of new services.

Imagine for a moment the competitive selling advantage of a message like this: You’re in total control – you decide how much to pay at the end of the session – based on how much value you think you’ve received.

Or this: These are the results you’ll receive, but you don’t owe us a dime until you realize them fully.

I know that kind of pricing model is open for abuse. Some people just don’t value anything the way they should, so it would require careful consideration, but I really like a couple of things that it offers.

Benefit #1

It changes the relationship between buyer and seller. This kind of offer is quite likely very attractive to the buyer because the seller is now effectively shouldering a great deal of the risk. This means the seller can and should be very picky about whom they allow to enter into such an agreement and what they require from that buyer in terms of working together. This can’t be a come on to attract people that want a deal or it will never work. This has to be a serious offer meant to remove the barrier of doubt and that comes with its own price – accountability. If done correctly, this method could allow you to attract more ideal clients rather than price shoppers.

Benefit #2

This is the one that might be the real reason a seller would resist this model. If you make this kind of offer and your pay day really does depend on delivering the goods as opposed to writing a great sales letter, you better bring your A game.

Imagine if your created a service in a laboratory where you started to build how it would work, how you would engage the client, what support materials you needed and what price you needed to charge in order to make a profit. Now, fill this lab with ideal clients for this service and ask them to give you continuous, real-time feedback as to the results and value they are receiving as you continue to improve the offering until they are willing to pay what you needed.

In many ways, this could be the ultimate method for developing the perfect engagement for a new service.

Once you established the ultimate value through people’s realization of results, you could benchmark and prove this value in ways that would allow you to move the model to a fee based one, but my guess is the service would be far better than the one you dreamed up in the quarterly strategy meeting.

While shouldering the risk you would get better at what you do and create services that would surpass anything your competitors would dare to offer. In fact, you would have to do this, or you would go out of business.

There are pitfalls in this model, no doubt, but if you can profitably overcome and manage them, you’ll have a tool without competition.

This kind of bold confidence in what you have to offer, if positioned correctly, sends a very strong message to the potential market about your belief in your ability to deliver results.

Taking my own advice

Like a great deal of the advice I dispense on this blog, I’m taking it myself.

I am conducting a full day live and in person workshop in Kansas City in June called – How to Build the Marketing System That Is Perfect for Your Business and I am going to employ this the model of exchanging fee for value.

Attendees won’t be asked to pay anything until after the workshop is over and they get to determine how much. This won’t be a light, stripped down version – this is me, testing what my best stuff is worth, so you can bet I’ll be prepared and you can bet I’ll ask a lot of the attendees.

If you’re interested in finding out more or applying to attend (there are two dates available, but the groups will be very small) – have a look here


kansas city marketing workshop, pricing strategy, results based pricing, value based pricing

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  1. John;

    I love this analysis. I’ve been writing a lot about pricing in my new eBook and I make a similar statement. That the most risk in a relationship is at the beginning, yet that’s when we set the price. Clients will attempt to mitigate the risk by lowering the price

    I’ve suggested that clients experiment with a system that says. “We think this engagement will be worth $25,000 to you — so to give you a terrific ROI we’ll price it at $10,000. $7,500 of that is firm, the last $2,500 is paid once we complete the job and only if you find that we have delivered $10,000 in value.

    This provides some shared risk, a clear ROI and a chance to earn more of the value you deliver. 

  2. Interesting proposition John. 

    I know of a person – Tad Hargraves in Alberta, Canada – who charges pay what you can for all of his workshops and he’s been able to find some way to balance perceived value and covering costs for his events. There is an interesting discussion on one of his blog posts: Anyways, I’d love to experiment with this idea sometime in the near future. Keep us posted on the results of your workshop pricing model test.

  3. You’ve made total logical/emotional sense to me, John — and I can’t wait to hear how your experiment goes. I wonder if it will be easier to get people to pay you since you’ll be doing all of this in-person? When we are looking someone in the eye, we tend to follow through a lot more. Most of my services are delivered online or by phone. If I’m not there to collect in-person, I’m afraid (<– key word!) that folks will shrug it off as not important. What do you think?

  4. This is a terrible model for consultants to use.  Instead of becoming a peer and partner to your client, by charging based on value, you are becoming a subordinate to your client, working on spec and trying to please the client no matter what — thus, if you have hard news for the client, such as that they should stop doing some sacred cow that isn’t working, you won’t bring it up, because you are auditioning for pay.

    For a better pricing model, check out the stuff from Alan Weiss in Million Dollar Consulting

    1. George – I thought it was perfect that you brought up Alan as I’m sure he would hate this idea as well. The point is two fold – sure you have to be selective about this idea, but I wonder how many consultants, Alan included, are incentivized to earn what they’ve promised – if you think this idea makes you subordinate, than you might ask yourself that question.

  5. I totally agree with you, John, that such a pricing model would be a huge differentiator that few could match, and I could see it potentially working for a service-based business. But here’s my dilemma:

    I run a sofware-as-a-service business, and I’m already fighting the common perception that everything on the Internet should be free. If free is the expectation, then why should anyone develop anything of value for the Web?

    A good example of this not working well is Pandora, which initially gave away the service for free and was/is a great concept, and when asking for “donations” didn’t work they had to go to some sort of paid premium subscription model. In addition, only a slim percentage of mobile app users actually buy apps (most people only download free ones).

    Groups like Radiohead can ask fans to pay what they wish for an album (like they did for “In Rainbows”) and Google can give away half the planet because they both have healthy alternative revenue streams.

    I do think pricing on the Web is due for some type of innovation, and the freemium and/or free trial model does seem to work in some cases (mostly because they offer proof prior to purchase).

    Anyways, good food for thought…

  6. That is a great pricing model. I know it would sway  me to their services versus a competitor. It tells me they are confident in their product and will ensure I receive the appropriate customer service in order to receive payment. Love it. Thanks for sharing! 

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