“Be Interested, Not Interesting” – the Best Rule for a Value-Based Pricing Mindset
As some readers of my writing may be aware of, I run a Meetup group called the “Stockholm Value-Pricing Meetup”. We meet about once a month to discuss value-pricing in all its forms and aspects.
At a recent gathering of this Meetup group, I talked about what value-pricing is and how to replace cost-plus pricing with value-pricing. Something I emphasized then was that value-pricing is not a method. It’s a set of principles, an approach, a mindset in fact.
What this means in practice isn’t always easy to explain. For me, value-pricing has become an expression of a belief or idea I’ve held for a long time in my role as a business owner:
That the best transactions are mutually beneficial.
The Error of Believing in Zero-Sum Games
In my line of work, digital services companies, the customer almost always wants to be in control. Large corporations consistently play this card ruthlessly in the belief that it will somehow maximize their return (it doesn’t). The idea is that a dollar taken from a supplier is a dollar earned. But as many others have noted, business transactions aren’t necessarily zero-sum games. Wikipedia defines a “zero-sum game” as:
In game theory and economic theory, a zero-sum game is a mathematical representation of a situation in which each participant's gain (or loss) of utility is exactly balanced by the losses (or gains) of the utility of the other participant(s).
In other words: In order for me to win, you have to lose (or vice versa).
Business transactions can surely be zero-sum games if that’s your approach. A lot of business is done that way. But taking the opposite approach, viewing them as non-zero-sum games, has enormous benefits for everyone involved.
This idea has wider implications since the idea of the non-zero-sum games applies to life at large as well.
Be Interested, Not Interesting
Credited to Dale Carnegie, author of the classic book How to Win Friends and Influence People. It holds an insight that can benefit you in more contexts than just the average cocktail party.
The main point is about how we view others:
Do we see them as a way or means to achieve our goals?
Do we think of spending time with friends as having a cost by taking away time we could focus on our careers or business instead?
Hopefully we don’t.
I firmly believe that working with value requires an honest interest in others. It demands that you have a service-minded approach to other people. Helping other people is valuable in itself to you, regardless of the outcome.
Once you adopt this belief, people will start to notice it. One aspect of it is that you will pay more attention to what they’re saying. You will leave strong positive impressions on people. It’s magnetic.
As an aspect of this, you will be attuned to what others value. The understanding of what they care about only comes through honest interest.
With luck and hard work you’ll gain the privilege to capture some of this value – that is my definition of "value-based pricing."
In fact, we shouldn’t need an expression like value-pricing at all. No pricing should be based on the zero-sum game idea of business exchange. Unfortunately many businesses operate without this understanding. Regrettably, many even do so successfully, by some measures.
Doing the Right Thing or Doing the Thing Right
This can have other side effects as well. One of the easiest mistakes you can make as a business is to let your internal perspective dictate how you relate to your customers. This happened to a company I was part of.
I was the co-founder of a rather successful web agency at one point in my career. We grew fast, and we were looking into ways to formalize processes and increase margins. The idea was to minimize deviations by doing this consistently. It’s the classic case of confusing efficiency with effectiveness. At one point I was talking to a colleague, who was responsible for this project, about a certain policy or rule we had. I don't recall the exact details, but I do remember clearly pointing out that his proposal didn't align with our customers' preferred way of working with us. His response was: “this is how we must do it, so our customers will just have to adapt.”
I was rather shocked at this lack of insight into what makes a business work. Our single-minded efforts to create a streamlined process had led to key people forgetting why we existed in the first place.
Don’t Be the “Star Wars Mint Condition Figure Guy” at the Party
No company has an inherent right to exist. A company exists to create value for other people. And I’m not just talking about shareholders. I talk about customers, and as a consequence employees as well.
A company that only cares about how it wants to do things for its own purposes is like the cocktail party guest who tries to impress everyone by only talking about his mint condition Star Wars action figure collection. Most people will quickly find an excuse to make an early exit and leave. So will the company's customers.
A company that tries to be interested, rather than interesting, and views their dealings with customers as non-zero sum games will discover what their customers want, need and value and will help them achieve it. With the added benefit of getting a share of that cake. Being of service to others is the highest order of being a business.
Similarly, such a company can also leave the metaphorical cocktail party conversation when the “interesting” buyers come by. The "interesting" buyers show up just to brag about how awesome it will be for said company to have their name in their list of references. They also state how grateful the company should be for being considered. I've been in meetings with such buyers.
An "interested" company knows its worth and will work to build strong authentic relationships with buyers who have come to the same insight. It doesn’t need to gain the approval of others by appearing interesting. It also knows that game when it sees it. It will give more than it takes, and it will be rewarded fairly.
This article appeared originally on Leancept's old blog.