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.'
I have never worshipped business leaders with a clear profit motive. I’ve never cared for that. One-sided gain has never seemed a meaningful achievement. Though some of those set out to do something else and managed to bring about a lot of good have also had tons of material success. That I respect.
Similarly I’ve long resented the idea of profiting from mere opportunity. By that I mean profiting from the fact that you hold a position or simply hold the better cards. You do not provide more value than anyone else or do it better. You simply charge more because you can and because your customers do not have a choice. You strong-arm by default, because you think it’s the rule of the game.
This likely has its roots in my strong sense of fairness. A sense coupled with a drive to earn. I’ve never rejected seeking material gain. But it needs to be done fairly. Fair earning is about two or more parties being involved in an exchange where everyone involved benefits. Sadly, a large portion of business transactions don’t take this form. In many, there’s a stronger party that can set the rules of the game.
The error of zero-sum games
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).
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 from 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
The core of it relates to how we see other people: Are they a means to an end for our goals and do we weigh our investment in them as an alternative cost to pursuing our own goals?
Hopefully they’re not.
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-pricing."
In fact we shouldn’t need an expression like value-pricing at all. All pricing should be based on the non-zero games idea of business exchange. Unfortunately many business operate without this understanding. Many even successfully, by some measures.
Efficiency vs effectiveness
I was the co-founder of a rather successful web agency some years back. 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 one of our VP’s about a certain policy or rule we had. I do not remember the specifics but I remember clearly noticing and remarking that his proposal was not consistent with how our customers preferred to work with us. His response: “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 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
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 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 its 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” customers comes by to brag about how awesome it will be to have their name in the company’s list of references and how grateful the company should feel for being considered. Such a company knows its worth and will work to build strong authentic relationships with others who have come to the same insight. It knows its worth. It doesn’t need to gain the approval of others by seeming interesting. It also knows that game when it sees it. It will give more than it takes, and it will be rewarded fairly.