What is a “value price”? Is it the same as a “worth-based price”? Can either of those be a “subscription price”? And what does Advanced Pricing Methods® include that basic worth-based pricing does not?
Sorting out the various pricing approaches we hear in the accounting profession can be really confusing.
I find that terms like value pricing and fixed pricing lack consistent definition. It’s no wonder there are big misconceptions about what they mean.
Case in point: more than one CPA has told me “Yeah, I value price. I do the work and decide the value, then I send the bill.” Um, no. A value price ALWAYS refers to the buyer’s perception of the value, not the seller’s. A value price cannot be known or arrived at without the buyer’s participation.
I’ve noticed these terms in a growing number of industry surveys. Yay for wanting to capture progress moving to new revenue models! But, without a definition for a (relatively) new term on the survey itself, we can’t rely on survey results to be meaningful because each respondent was left to their own interpretation of what the term means. And as you read, above, not everyone gets it right.
Characteristics of the Common Pricing Approaches
Unfortunately, defining any of these with a tidy little soundbite is tough because many of their characteristics overlap.
To create more clarity, I’ve created this chart. It lists several characteristics and where each pricing approach falls along the spectrum of exhibiting each characteristic.
This chart compares a handful of approaches including my own, Advanced Pricing Methods®.
Advanced Pricing Methods® are built on a foundation of worth-based pricing but also harness marketing best practices that: a) position the seller for higher worth in a buyer’s eyes, and b) package multiple services together to achieve a buyer’s overarching goal.
The Term “Value Price” Has Baggage
In addition to the chart above, this written description helps explain why I, personally, don’t advocate using the phrase “value pricing.” I much prefer the term “worth-based pricing” instead.
I hope you’ll find these helpful and I expect these definitions may evolve so I wholeheartedly invite feedback either here, on X/Twitter (@michellegolden) or LinkedIn.
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