How Does Value-Based Pricing Work

In this quick blog post, you’ll learn how to quantify the value of your services. So if you’ve ever wondered “how does value-based pricing work?” you’re in the right place.

I like clear cut strategies and get paid to help other people create their own. So naturally, it really bothers me when I see business coaches and educators telling people they need to do value-based pricing BUT then they give absolutely NO context for how to actually do it.

I think this is a huge gap in the market right now. 

It’s like telling someone who is angry or upset to just calm down. Not really that helpful in the moment.

And when it comes to pricing, it’s not helpful in the future as well. 

If you were to google ‘how to price my services’ I bet a lot of the blog posts will tell you to do value-based pricing. They might even tell you why it’s important or that it’s the “best” pricing strategy. 

Buuut, they leave out the bit you want, which is how to do value-based pricing, and it leaves you thinking, “okay, but how do I ACTUALLY do that though?”

You might even stumble onto posts that teach you about other pricing methods. For example, cost-plus pricing and competitive pricing. 

That advice is also extremely outdated. 

In my signature pricing framework, I teach my clients and students on why only using ONE of those methods is hurting your service-based business. 

That topic is another blog post in and of itself, but it’s important context for you to have going into this. I think value-based pricing is good, but my pricing framework is better. 

So I’m going to teach you how to do value-based pricing in real life.

How Does Value-Based Pricing Work? Here’s My 3-Step Breakdown.

The first step is to figure out how to quantify value. 

If you came to the interwebs searching for help with pricing, odds are you have a specific service in mind you want to price. So I want you to right now get out a pen and paper or in the notes app in your phone. Now write down one service that you are trying to price.

Got it? Cool.

Now, make sure you price that service in a way that reflects the value.

JUST KIDDING. That is what an UNHELPFUL piece of advice would be. (And sadly what most blog posts about value-based pricing tell you to do.)

Because the above statement is ambiguous. It’s broad and too abstract. When it comes to pricing, all three of those things are NOT helping your business make the money it wants to. 

Now, for the helpful part.

When it comes to learning how to do value-based pricing, you need to understand how to actually quantify the value.

Follow the steps bellow to quantify the value of your services.

So, in my COSMO pricing framework, I teach people to quantify the value of their services by breaking it down into 3 categories:

1. Your experience and expertise.
   • How many years of experience and expertise do you have compared to your competitors? Are you just starting out, or are you an expert in your field? This is one of the ways we quantify the value of your services.
2. The quality of your services.
   • How would customers rate the quality of your services? Are they below average, average, or above? This requires radical honesty. This is another thing to take into consideration when pricing your services. 
3. Brand positioning and uniqueness.
   • Do you offer something they literally can’t get anywhere else? Are your services, your method, or what you offer different from your competitors? Meaning, they likely can’t get this elsewhere. This is another thing that affects the value of your services.

If your experience is higher than most, you are an expert in your field, and offer services or a method they likely can’t get else where, then the value of your services is HIGH and the price should reflect that. 

Now notice how I didn’t say that means charge the highest you can. Your pricing still needs to be intentional and take into consideration your industry and current market conditions.

If you’re just starting out or don’t have that much experience, that’s okay. It doesn’t mean you need to charge the lowest price possible. It means your prices need to reflect those things.

By breaking this process down into those 3 steps, it helps you get a concrete idea of what the value of your services are. 

This is how we start to take something that is subjective (like value) and make it concrete, AKA an actual number. And once you learn how to put a number on the “value”, you are on your way to pricing your services and offers.

But value alone should not be the only factor determining what you charge.

In my COSMO Pricing Framework, I teach you how to price your services easily and in a way that reflects your value, the market, and other important things that most pricing templates and teachings miss. 

So if you want to solve your pricing problems for good AND feel confident in your prices so that you know you’re making the money you want, my Pricing Template is for you. 

Take your pricing beyond the outdated value-based pricing, cost-plus pricing, and competitive pricing methods.

The template and workshop are literally the perfect duo to help you price your services and offers. You’ll learn my pricing framework and in the workshop, together we’ll go step-by-step to price your services.

You’ll also have the template that will automatically calculate your pricing for you.

So it’s like that saying, “give a man a fish he eats for a day. But teach him how to fish he eats for life.”

The Nail Your Pricing Template will literally feed you TODAY and for the rest of your life. Click here to find out more info. 

Listen to this episode on the Podcast to learn more about popular pricing myths and why you shouldn’t fall for them.

Click here to listen on Spotify and click here for Apple.

Now that you learned my 3 steps on how to do value-based pricing, you can start confidently pricing your services. And if you want a shortcut to make it even easier, the Nail Your Pricing Bundle does the heavy lifting for you.