What Makes People Buy? Price & Value Masterclass w/ Ron Baker

Introduction and Comparison with Other Theme Parks

Why does Disney command higher prices than amusement parks they’re right down the street sea world universal studios i mean there’s a ton and you know what is it about these companies well it’s because they’re focused obsessively on value to the customer and the customer experience and that’s what gives them that pricing power i’m like okay on makes a great point i’ve been looking at this all the wrong way i’ve been focused too much on this very self-centered idea of like what it cost me to make and the labor and what i should charge.

Acknowledgments and Influences

I first want to just think two people in particular hector garcia for connecting us because without him this would not be possible and also for another gentleman which i’ve been heavily influenced by his name is blair enz i’m reading his books on pricing and your name is mentioned i believe on his podcast he refers to your book implementing value pricing as canon and i like to go to the source so i feel like i’m getting a little closer to the source the fountain of knowledge and that is you and so i’m super excited.

Introduction of Ron Baker

So ron for people who don’t know who you are can you please introduce yourself wow ron baker recovering cpa started my life in a big eight accounting firm and by the way chris that’s how you carbon data cpa you listen to they say big eight big six big five big four well i’m big eight so it gives you a sense of the era i’m from but i knew i wanted to be a cpa at 15 so you know went through college and got my certificate worked a couple years in public accounting then went out started my own firm and it was there that i realized billing by the hour was a really crappy customer experience and so in 1989 me and my then partner we just decided we’re going to do fixed prices there was nobody out there talking about it at least in the professional space there were no books no courses no consultants ever advocated it everybody was into the billable hour and the timesheet and we just said this is a crappy customer experience because the unpredictability of a price is just unacceptable just goes against everything we know about how consumers buy and how humans buy we want to know the price before we buy so we can make that all important value price comparison and we just started doing that we made every mistake under the sun but it was a customer service that got me into this it wasn’t the economics i got into the economics later as you see in the book but it was really customer what we now call experience but back then we called it dqs total quality service i was studying companies like nordstrom lexus disney ll bean fedex i wanted to emulate their customer service spirit and that’s why we did it and it worked great.

Early Interest in Accounting and Influential Experiences

There’s so many things here i want to just dig into a little bit you said at 15 you you wanted to be a cpa that’s unusual for a lot of different reasons to have that kind of clarity but why cpa what is it about your life and your life experiences that told you this is what you need to be probably goes back to middle school so ninth grade for me probably sitting at my dad my dad was a barber so i learned business from the inside of a barber chair essentially and we were sitting at the kitchen table and i was pretty good with math and i would help him fill out his deposit slips because i could add really fast and i saw an envelope there and it said pizzeni and brinker certified public accountants and i looked at my dad and i said dad what’s a certified public accountant and he said somebody who charges a lot of money and and that stuck with me and so when i went into high school had a great accounting teacher his name was angelo catalani he had a two-year not just a one-year but a two-year accounting program which i did and then i the third year i was his teacher’s assistant he would bring in cpas he taught us how to do taxes so i started the tax business in high school i started up an accounting practice did my dad’s books i did a bunch of his friends i represented people before the irs all at 16 17 years old that’s how i put myself through college and i was doing a time sheet because every cpa i talked to said well you got to track your time you gotta have an hourly rate blah blah blah get into the big eight do.

Questioning Hourly Billing and Introduction of “Implementing Value Pricing”

a time sheet hourly rate never questioned it until i started my own firm and then i said this is the most ridiculous thing i’ve ever seen and we changed it now i know your background is as a cpa and you also minored in economics and the book i love the book and i tell people anybody’s willing to listen to me you need to read the book implementing value pricing and the reason why is because every single page it feels like i need to stop pause reflect write down understand process and it’s that kind of book and it’s a little intimidating i have to say for a number of different reasons one is it’s listed as 85 on amazon which is pricey for a book but i got to tell you what’s inside is worth 10 next at maybe 100 x that if you implement just a few of the key ideas and concepts and for people in my world that are in the creative services space the ideas that you talk about in the book are so counter what we’ve been taught in our lives it is so revolutionary for people in the creative space to think like this and i want to tackle some of that and the reason why i want to do that too is because i’ve been talking about getting away from hourly billing and to my surprise people in my own community they call me all kinds of names not very nice names and i’d like to adopt some of their attitudes for you to be able to address so that i can then just point to them and say look at this video listen to this podcast and you’re gonna be set don’t even take my word for it take it from a person who’s lived in this space who is as qualified as anybody ever to speak about this and so can we jump into this oh sure that’s fun

Value Perception and Labor

so here’s the thing is that for whatever reason i think historically speaking and i think you talk about this in a book is that value has always been tied to labor why is that and why is that such an antiquated and i won’t prime it so much like tell me about that thought and then please guide us through this process right i think in medieval english uh acre the word acre was how much land you could plow in a day or something or in the morning yeah we’ve always tied labor to value this goes back you can read things out of aristotle plato on this concept but the person who really put a framework around it was karl marx basically positing the labor theory of value that basically said look the value of anything a commodity a product or service is solely determined by the labor that goes into it well okay that’s an interesting theory the question is does it explain how you and i spend money so if karl marx was right then a diamond or a rock found next to a diamond in a mine would be of equal value after all it took the miners just as much time and billable hours to find the rock as the diamond but yet i don’t see many rocks in jewelry store display

Critique of Labor Theory of Value and Introduction of Subjective Theory of Value

cases raw land that has no labor and it trades every day for a fair market price it’s got no labor if marx was right then the 20th slice of pizza that you eat or your 20th tequila shot should be just as valuable as your first or your second well obviously over time as you consume more it becomes less valuable so marx didn’t take into account the customer he only looked at it from the labor side and said labor hours so it was really overthrowing that theory and you know when you replace a theory you gotta go somewhere and the only place to go from one theory is to another theory and so the correct area value is the subjective theory of value that says no no no no there’s nothing intrinsically valuable about anything except human life let’s put that aside we’re talking commodities there’s no such thing as intrinsic value people challenge me on this all the time what about gold what about bitcoin it’s got no intrinsic value if tomorrow we learned that gold was i don’t know a carcinogenic its value would drop to zero there’s nothing intrinsic about value inside of a product or a service it depends on the utility it provides to the consumer so i think i was the first guy to really pull out the labor theory of value and equate that to the billable hour and that branded me a heretic i mean i got a lot of enemies because of that call basically essentially you’re calling business people your fellow colleagues marxists and it’s a hard thing to get around because we continue to look at it from what we put into something versus what the customer gets and it’s a big part of your book because this isn’t necessary blueprint on how you can take in reams and reams of money it’s really about how you can create greater impact and transformation for your clients and amount of money that you’re able to build because of that is based on the impact that you create i want to get back to this thing about this labor theory of value so a common argument that’s made within my community is this is that and it seems to make sense from their pov the harder it is for me to do something the more valuable it should be it feels like that so if i have to get a degree to be able to practice something or a graduate degree i put in a lot of time and energy and therefore my price should be higher it seems like that seems reasonable and if i really work on a piece of design a drawing a blueprint it takes me a year to design for a client it should be worth a lot more in theory so the example is something like this a logo is relatively simple to create you have some software you pick out a nice typeface you might tweak it a little bit and so they think then it has a very low market cap and so when i tell them large corporations like someone that you mentioned nordstrom’s fedex they pay a lot of money for that logo they can’t understand this so can you do a little deeper dive and just pretend like i’m one of those creative people like no it’s like unethical it’s immoral to charge more than 400 for a logo because that’s all it took to make yeah you know this is really interesting this and this again goes right back to the labor theory of value versus objective but basically when you really look at the chain costs are determined by price so price justifies the cost a business can expend so i’ll give you an example take a manufacturer that makes hats and coats we all know that code’s going to probably be 10 times the price of the hat is that because it costs the manufacturer 10 times more to make the coat than the hat no it’s because consumers value the code 10 times more than the hat they’re willing to pay a price that justifies the business spending the costs the additional costs to make the coat and so just like going to med school people go to med school because the value of a doctor is so high people are willing to pay a price that justifies their human capital investment going into debt buying insurance all the things doctors have to do so i think this is one of the hardest things for people who bill by the hour to get their head around but cost does not determine price in the real world price justifies cost because if it was true that cost plus say a profit margin and then that determines a price if that theory explain the way the world works cost

Subjectivity of Value and Customer Behavior

plus pricing then no business would ever go bankrupt after all it doesn’t take a rocket surgeon to put a price above a cost right yet why do businesses go bankrupt well because value is subjective and customers change their mind on a dime and one minute we’re fondling our iphones and the next we’re off to something else and value changes because it’s completely subjective it’s in the hearts and minds of buyers has nothing to do with the effort i mean the books i’ve written chris if i spent 10 years on them and didn’t sell one and then ran around with a cheeseboard sign on me and said you don’t understand how hard i worked on this nobody cares it’s it’s what have you done for me lately what’s the utility what’s the value for the customer stop boring me with your internal costs your efforts your struggles i don’t care i care about the outcome nobody cares how long it took toyota to build their car so is it too far to say that then those people who are fixated on what it cost them to make something the labor that they apply to something irrespective of the context and the value to the buyer that they’re actually being selfish and myopic and understanding this that’s a great point i believe so i believe people who engage in cost plus pricing think the world owes them a living yeah because i’ve got overhead because i signed a lease because i’ve hired employees because i bought equipment you have to pay for my costs plus give me a decent profit right now we can argue over that profit margin but yes i do think it’s an entitlement there’s an entitlement mindset to it whereas in the free market you got to produce value it’s you know your customers the ultimate sports fans what have you done for me lately right and if you don’t provide that value then they decide which businesses go out and which businesses don’t make it you got to please the customer i love that it’s a nuanced way of looking at things and i hadn’t heard this before that if truly value is equated to cost

Challenges of Cost and Labor-Based Pricing

plus profit then why do companies go bankrupt it’s because sometimes and actually often is the case it costs you more to produce something and more labor involved in what the market is willing to pay for something this happens all the time with cars with real estate with everything absolutely and i love that and i want to talk about it a little bit more before we get into the solutions because i think people are really in love with this idea of labor and value another question i had for you is labor is attached to value how does one explain luxury goods oh you can’t you can’t even explain apple i don’t think it cost apple much more to produce my laptop here that i paid i don’t know 3500 than it does for hp or dell right there may be sure there may be some you know cost differential but it ain’t a lot certainly but not with the iphone or the ipad yet why does apple have such command and pricing power and they can charge five times seven times more than dell why does disney command higher prices than amusement parks they’re right down the street sea world universal studios i mean there’s a ton and you know what is it about these companies well it’s because they’re focused obsessively on value to the customer and the customer experience and that’s what gives them that pricing power yeah so i guess you’re right so assuming that we’re a fairly rational logical creatures that you have two similarly spec laptops one from dell which is drastically different in price than apple so why does a rational person say same processor same amount of rams in video card why would i be willing to pay maybe 800 premium or maybe even more for something that has a logo on it that looks like an apple what is the psychology behind that yeah i think well i think it shows you the power of brands people say brands are dead i think that’s the furthest thing from the truth i think brands are important they they represent a promise as you know i think you know the price does reflect something about how the company perceives its own value you never see apple go on sale you never see them offer you know may day parade sales or something no because they keep their pricing integrity aligned with their value you never see apple justify price increases because their costs went up every time i read in the paper and now every day now you can read stories a starbucks is raising their price because the cost of coffee went up well i’m sorry i’m the customer i’m not starbucks cost accountant i don’t care about their internal cost stop boring me either just shut the hell up and raise the price or

Starbucks Coffee Pricing and Value Perception

“Don’t sit there and try and justify it on costs because I don’t care about your costs, and dear Mr. Starbucks, I’m not buying your costs. I’m buying a great cup of coffee or whatever it is or a place to go. I’m glad you corrected it as all the coffee aficionados, like yeah, I know it’s a third way, the whole third-way thing between home and office, yeah, right. So for you, you make the determination on whether the cup of coffee from Starbucks or anybody else is worth it to you. So at some point, they’re going to raise that cup of coffee to a price point which you’re like, you know what, the experience, the feeling I get, the great place to go, the friends I might bump into, it’s just not worth it to me anymore. And you, the buyer, you get to determine the value to you, right?”

“Absolutely, and Starbucks has to continuously test that and see how price-sensitive their customers are and what the effect is on demand if they were to raise the price. And trust me, they know that; they study that continuously. I mean, it’s a continuous process. But the point is that when I walk into a Starbucks and spend five bucks on a latte, I only did that because it was worth more than five dollars to me because if it wasn’t, I could have stayed at home and made a cup of coffee for a dime. And yeah, Starbucks coffee is good, but is it 50 times more valuable than what I can make at home? No. So really what’s going on is anytime you see a transaction, both the buyer and the seller are making a profit. And how do we know this is very simple? It’s a double thank you moment. You get the coffee, you hand over your five bucks, you both say thank you. If you both didn’t think you were doing profiting from that transaction, wouldn’t one person say, ‘You’re welcome,’ right?”

“I love that, the double thank you. So is it then possible for such a thing to exist as an unfair price? Yeah, this is why I have an ethics chapter in all the pricing books I’ve ever written because this, the just price has been, again, go back to Saint Thomas Aquinas for this and a bunch of Greek philosophers. I think a just price is one that buyer and seller freely agree to. Now it’s easy for a third party to come in afterwards and say, ‘Well, that was an unconscionable price,’ or ‘You took advantage of the person.’ Obviously, if there’s fraud, coercion, any violence, anything like that, that’s an unjust price. Obviously, if there’s price fixing or any violation of antitrust, that’s not a fair price. But the problem with fair is there’s no definition of fair. It’s what a willing buyer and seller agree upon.”

“I remember we had Reid Holden on who’s one of my pricing mentors on our show, and he was complaining that he was at his second home somewhere, throwing a big party, and his ice maker went out on the refrigerator. And he called a repairman, and the guy said, ‘Well, I can come out same day, couple hours, but it’s going to be 300.’ And he thought that was unbelievably unfair. And I said, ‘Did you pay it?’ And he said, ‘Well, yeah.’ Well then, by definition, you must have thought it was more profitable than the 300 you paid them. So no, I even would go so far as to say anti-gouging laws are a stupid policy like after hurricanes because prices send signals about how we allocate resources. And when you’ve got a hurricane and you need lumber and generators and water and Pop-Tarts and other things, the only way to incentivize the person sitting on the couch in Ohio to get up from the football game and get in his truck and drive overtime down to a disaster zone is if the price goes up high enough to justify those additional costs of paying him overtime and all of that. I think it’s a fair price is what takes place between a willing buyer and a willing seller. I call it capital stacks between consenting adults.”

Pricing Signals and Market Dynamics

“Alright. I want to go back to your statement: pricing sends signals. So when we go and buy something theoretically a commodity and we look at something that costs a lot less and something that costs a lot more from a buyer’s perspective, what signals are being sent to them? How are they receiving that?”

“That’s an interesting question because if you’re talking about comparisons between companies or comparison within the company, you know most companies will offer us three options, right? I just bought an Apple Watch and I had, you know, there’s the Apple, I don’t know, SE5 and seven. So there’s always opt and then of course there’s options within each one of those. So that’s comparison within companies. But between companies, it’s very economists love to see markets that have a wide array of pricing. Think if that didn’t exist in restaurants either everything would be McDonald’s or everything would be Ruth’s Chris and there’d be nothing in between. Well, that’s a healthy dynamic. Robust market will have a panoply of price points and value propositions. Just look at the hotel industry, you know, with all the different brands Hilton Garden Inn or Marriott Courtyard or whatever all the way up to Ritz Carlton and Four Seasons. That’s a healthy market. So we like to see wide variations in price points and then that means the business is gonna have to figure out where they position themselves. You know, are you Ruth Chris or you’re McDonald’s? And by the way, as Tim Williams taught me, my guru when it comes to the marketing world. Do you know Tim Chris?”

“I do not.”

“Yeah, we should put you together. Tim’s brilliant. His ad agency was the one that did ‘What Happens in Vegas Stays in Vegas’. I’ll tell you a side story about that. And I lost my train of thought. It was the wide array of pricing points that you have in the dynamic market. And that’s a beautiful thing. And what Tim taught me is your brand can only stand for one thing. So you can’t be Ruth Chris and McDonald’s. Stop trying to be all things to all people. He’s a big believer in niche-ing, putting yourself in the box, specialization. By the way, he did that campaign ‘What Happens in Vegas Stays in Vegas’, which of course changed the zeitgeist of the culture. I mean movies were made in that title. He’s put together a clip like a five, six-minute clip. I’ve seen it of comedians, late-night comedians. I think it was Jay Leno at the time. I forget who was on Johnny, but around the world using that ‘What Happens in Vegas Stays in Vegas’ as a, you know, some type of joke. And when I first.”

Pricing Strategy and Customer Perception

“I met Tim, I believe, in 2003. I had read his first book, and I looked at him and said I have one question to him: how did you price that campaign? And he looked at me, and then almost looked down at his shoes in just embarrassment and said, by the hour. And I said, how much money do you think you left on the table? And he said, ‘Millions. They’re still using it.’ I think it was the Las Vegas Convention Bureau or something that they did it for. Sorry for the diversion but no, no, that’s a great story. I love that.”

“That goes back to some of the points that you’re talking about, which is why we have this practices mindset around our value in billable hours. There’s something here that I wanted to kind of dive a little deeper in, which is Seth Godin wrote this book called ‘All Marketers Are Liars.’ And we, as the buyers of stuff, are complicit in the lie. When we pour an expensive bottle of wine or a brandy into a very expensive glass, we tell ourselves that it’s going to taste better. When we go to an expensive restaurant or amusement park and we pay more for it, we tell ourselves this is worth it; otherwise, we wouldn’t pay for it, like your friend who had his refrigerator repaired.”

“So one of the things I’d like to talk about is if you want better clients, just charge more because the clients are going to say, ‘You know, you must be worth it.’ What are your thoughts on that?”

“I think that’s… There’s some definite truth to that. I mean, high prices send a signal that this has got to be high quality, right? It’s a heuristic we all use, even when we’re comparing something within a company. Like back to the Apple iWatch, I figure, well, the Apple 7 is the seven, eight hundred dollar watch. It’s the most expensive. It’s gotta be the best. It’s the latest technology. It’s the fastest. Got the most features, blah, blah, blah, blah. So that’s a heuristic that we all have: high price equals high quality, great experience, whatever it might be. We need to tap into that, but we also need to deliver. And it’s got to be consistent with our positioning and our strategy and our purpose.”

“There is nothing wrong with being a low price leader. It is an incredibly viable business model: Costco, Walmart, Southwest Airlines, H&R Block, McDonald’s. You know, we can go down the list of companies that don’t necessarily compete on price but offer kind of what’s called penetration pricing where they come in really cheap. And that’s very viable. Problem is, in any one industry, there’s not room for a lot of those folks. And it’s a completely different business model. They have to be completely efficient. They have to constantly be on the lookout to save costs and then not only save costs but then pass those savings to their customers in the form of lower prices. And that’s a tough way to live. And I think it’s no way to live for people in knowledge work where it’s creativity and we’re selling our minds, not our hands. We’re not making a product necessarily. We’re trading in intellectual capital. We just can’t do that because we’re not machines.”

“Okay, one more question in regards to this mindset. You’ve written that value is subjective and that price is contextual. If you interpret that it means that you price the customer, not the job. So charging someone based on what they can afford, the relative impact it will make on their business. It sounds like charge rich people more, charge poor people less. Is that the idea? Is if that’s the case, is that immoral and unethical?”

“Well, no. When you look at price discrimination, as it’s called, and I mean that in the purest economic logic vernacular sense, that term has been around since the ’20s. So there’s a lot of.”

Benefits of Price Discrimination and Value Pricing

“If you look it up, Google it, you want to Google price discrimination, you’ll see it’s got a rich history. And if you think about it, without price discrimination, the ability to charge different customers different prices irrespective of cost to serve those customers, there’s incredible welfare effects to an economy from price discrimination. If it wasn’t for price discrimination, you wouldn’t have senior discounts, you wouldn’t have coupons, you wouldn’t have children getting into Disney for cheaper or flying on an airplane cheaper. You wouldn’t get expensive drugs into poorer countries at cheaper prices because we price the richer countries more. So I think there’s enormous welfare benefits from price discrimination. And when it comes to a business, my guess is you’re probably not serving the poor and the rich. You may be servicing businesses that are in startup phase with no money and more well-established companies or more profitable steadily and all that. But I do think you have to take into account the customer’s situation and their context for value; otherwise, how do you know if you can even adequately service them, right? If I go to a general physician and say I need heart surgery, he’s not going to be able to help me. And he’s going to refer me to a specialist. Blah, blah, blah. But if you’re staying in your lane, then you have a very well-defined customer. And I don’t think price discrimination is that big of a deal. You’re still going to have variations in prices because different customers are different. But it’s just not that big of a deal. And I don’t think there’s anything immoral about it.”

“So if I’m listening to this now, I’m like, okay, Ron makes a great point. I’ve been looking at this all the wrong way. I’ve been focused too much on this very self-centered idea of like what it cost me to make and the labor and what I should charge. What is the path forward? What should I do next? How should I look at this if I’m not going to price based on labor and effort in the billable hour? What should I be doing?”

“Well, if you follow value pricing, you price the customer. So you have a value conversation. And then Blairen’s book, he’s got a three-step process to the value conversation, which I think is brilliant and works really well in your space. Just make sure that you understand what it is the customer is trying to achieve. So I’ll give you a real quick story. I need a landscaper. I’ve been in this house for 20 years, and I think I’ve been through about a dozen landscapers, okay? They frustrate me to no end. I can’t even begin to tell you. And I go and I find three landscapers, you know, talk to neighbors, ‘Oh, try this guy, try this.’ So they come out to look around, give me a bid. First guy gets out of his trucks, got clipboards walking around the place, you know, checking the backyard, checking how big the lawn is and trees and the shrubs and all of that. He says, ‘Ron, we can do this.’ He says, ‘We’ll be 40 bucks an hour, and we’ll come out once a week, and we’re 40 bucks an hour.’ Now he’s pricing me based on inputs, right? Pure case of he’s selling me his costs. Of course, it leaves me with more questions than answers because I’m thinking, well, you’re gonna send a bunch of eight-year-olds out here and mow my lawn with a BB gun. It puts my mindset right away, ‘Well, how long is it gonna take? I don’t care how long it takes. What I’m trying to get at is a price.’ The second guy comes out, gets out of his truck, same thing. He’s got a clipboard. These are pros. They know what they’re doing. They’re scoping the job. They’re pros. They’ve seen a million yards. He walks around, he looks at me at the end. He says, ‘Yep, says we can do this. We’ll do the edging, we’ll do the mowing, we’ll take care of the bushes and the trees, hundred dollars a month.’ Okay, he’s not charging me based on inputs. He’s charging me based on outputs. He’s given me a defined scope of work. If anything pops up outside of that scope, I’m sure there would be a change request and okay, that’s good. That’s a step up from the input guy. Third guy comes up, gets out of his truck. He’s got a clipboard too, but he starts talking to me. ‘Ron, tell me about yourself.’ ‘Well, I’m a consultant, writer. I travel a lot.’ ‘Yeah, not home a lot.’ This was pre-COVID. And I said, ‘No, not home a lot.’ And he said, ‘And I take it you’re not Martha Stewart. You don’t enjoy yard work.’ ‘No, I hate yard work. I’m absolutely bored with my yard. Don’t want to think about it. I don’t want to have to look at it. I don’t want to see a dead shrub, dead tree. I don’t—make me even.’ “

Customized Pricing and Value Propositions

“Think about it. It’s my radar. You’re in trouble. That’s why I’ve been through 12 of you people.”

“And he said, ‘That’s very frustrating.’ He says, ‘Why did you fire so many landscapers?’ I said, ‘Because I have to go out and tell them things, and I’m not home a lot. I’m on the road 200 plus days a year. So if I happen to be home when they’re there, the once a week that they’re there, it’s kind of like every Hailey’s comet. This happens. I have to go out and point to a sprinkler that’s not working or a tree that’s dead. Why? They’re the pros. They’re out there. They should just be able to fix this and not bug me about it.’ He said, ‘Yeah, it’s very frustrating.’ So he looks at me, he says, ‘I’m gonna give you three options.’ He says, ‘I can provide you with basic maintenance, basically the scope of work that the output guy gave me.’ He says, ‘And that’s $150 a month.’ He says, ‘Or our middle package is I can bring your yard up to neighborhood standards so you stop getting nasty letters from the HOA, and that’s $225 a month. Or if you go for our top package, I can give you the best curbside appeal in the neighborhood, and over time, we will upgrade. We will plant new bushes and new trees, and we’ll do different landscaping, and that’s going to be $300 a month.’ And that’s three times more than I’m paying now.”

“At the time I made was confronted with this decision, which guy do you think I hired? Without a doubt, guy number three. But which option did you pick? Best curbside appeal. How did he know that? He asked me what my intention with this property was. I want to sell it in a couple years. Bingo. He didn’t know that. He might have. He still might have put it in there for an anchor. But I will tell you, if he goes next door to my neighbor who loves yard work, that’s going to be a totally different value proposition. That guy does care. He’s out there every day, fiddling with his yard. So he’s probably going to hire the landscaper to do specific things or maybe just one thing. That’s a totally different value proposition for me. Why? Because value’s subjective, and context matters.”

“But here’s the moral of the story. I know it was a long-winded, sorry story, but I’m paying three times more to this guy. He’s slowly upgrading my yard over time. He’s not doing this upgrade all at once. And I’m a happier customer, and I’m paying three times more than I was, and I’m happier. What better win-win situation could you fathom than that? And I believe that all of the people who listen to you in their business, they have the same. Best curbside appeal. There’s a best curbside appeal for every customer. It’s going to be different, but it exists. Find it. And the only way you uncover it is through that value conversation. And that’s why the value conversation, I think Blair calls it the closest thing that business has to religion because you need to be in the choir every week to really practice and get good at it. It’s an art, but it’s really important because if my expectations are too high as a customer or you’re not the right provider for me, whatever, you have to figure that out as the professional.”

“So I always quote the second law of medicine: prescription without diagnosis is malpractice. And we tend to just dive into the work as professionals because that’s our comfort zone. That’s what we’re good at. We just want to get going on the work. Lawyers do this. Accountants do it. And it’s wrong. You gotta take a medical history. You gotta do diagnostic tests. You gotta have that value conversation to figure out what their expectation because if you don’t do that, it’s the equivalent of me going to a contractor and saying, ‘Build my dream house.’ Well, what the heck do you mean by a dream house? Where are your architectural plans? So the value conversation or the architectural plans. I love that story so much, and I think it’s so relatable, and it’s going to be hitting our audience so hard because although a lot of our content is geared towards designers and creative types, we’re finding that people.”

Landscaping Example and Customer Needs

In the creative services actually expand way beyond this so that landscaping example is so relatable and you so clearly told that story i love it i want to ask you a couple of questions or at least confirm a couple things in this situation of the third landscaper they needed to understand your pain point i travel a lot i don’t want to deal with any of this you guys should do your job and be professional and they also found out that you’re interested in selling your house and they tied at least in some degree although it wasn’t illustrated in the example that curbside appeal has a lot to do with property value or at least the way that we perceive it that’s why it’s called curbside appeal.

Understanding Customer Needs and Pricing Strategy

So then once he knew that he was able to kind of understand your needs and your threshold of the pain and price and he gave you multiple options which i believe allows you to say okay of these things now have context i know what the cheapest option is i don’t want that i know what the middle option is and that sounded pretty good but this other thing where you anticipate my needs and you are a collaborator in the curbside appeal department here i like that a lot and for me i’m speaking for you there 300 bucks even though it’s three times as much as you were paying before was solving your problem did we get this right yes um i should have said the third guy is charging me based on an outcome it’s actually what i like to call a transformation he’s actually transforming me from somebody who you know has a decent yard but wants to take it to the best curbside appeal so he’s charging based on outcomes the other thing is i don’t think he’s just solving a problem he is solving a problem and we professionals were great at solving problems but i think we get too hung up on pain points and solutions to problems.

Moving Beyond Problem Solving

Peter drucker makes his point is absolutely profound if all we’re doing is solving our customers problems we’re just reverting them back to the status quo we’re not progressing them and this guy’s progressing me he’s giving me best curbside appeal so yes he’s solving my problems but he’s also helping me pursue opportunity and i think all professionals across all professions especially marketing build brands do logos branding power and pricing power and all of that we help our clients achieve their dreams we really do and we don’t talk about that enough we’re too busy focused on what you’re paying what you know why do you stay in bed in the morning you know type of thing and i don’t think that’s a good enough language i think we our language needs to encompass we’re not just problem solvers we’re possibility pursuers or you know some type of language that indicates that we do more than just revert you back to the status quo.

Long-Term Perspective and Value Articulation

The other thing is if i move after selling assuming i stay in california which most people don’t but assuming i do who am i going to hire for the new place now i might slide down to his middle level but that’s still two times more than i was paying prior guy noticed that all his prices were more expensive than the other landscaper well the hourly guy don’t know because he could have piddled around right and charged me a fortune that shows you that if you frame and articulate your value well you can command premium prices so alliteration aside the possibility pursuer is that also the same concept as some desired future state he’s able to help you and him realize this yeah that’s the goal of the transformation when you’re providing transformations the customer is the product it’s not about my yard work i don’t care in fact he’s coming out tomorrow but usually i’m on a podcast or something like this i don’t want them here very long because they make a ton of noise when they’re out here so i don’t care about the labor i care about that he’s slowly but surely upgrading me to best curbside appeal a desired future.

Importance of Understanding Customer Needs

That’s what we need to get from our customers. That’s what I mean by best curbside appeal, so I’m glad you said that future desired state. Okay, so there’s an interesting thing that happened in this illustration: the first one where the person came out looked at your yard and ultimately just told you their hourly price. So then it begs the question: do they even need to come out? Do they even need to look at their yard? Why not just tell you “you want to hire me, it’s 40 bucks an hour,” right? It’s a great question. Maybe they just wanted to make sure or something, or maybe they have different hourly rates and they think that’s a form of price discrimination depending on how big the yard is or how nice the neighborhood is. Could have been a million things, but it’s not sophisticated pricing, and I see this in the trades a lot. I’m amazed by it. I had my house painted a few years ago, got tunnel windows. It’s a big two-story house, and when I had three quotes and not one of them, not one of them offered me options, and that is such a serious mistake. You’ve got to offer your customers options because it changes the frame of mind and the customer from “should I work with Chris” to “how should I work with Chris?” And that’s very, very powerful, and if you’re not offering options, then you’re not doing that, and this is why every business on the planet gives us options, except businesses that bill by the hour. It’s the opposite. It’s like a bizarro world when it comes to people in the professional services space, right?

Yep, where everywhere else we have pricing certainty and we have pricing options, and we understand that we participate in that, and then for some reason when we enter into our own business, we put on a special invisible helmet that says in this world those rules do not apply and we’re asking our customers all the time to say like “okay, so I have no idea how much this is going to cost, I know what it’s going to cost you, and I have no certainty of outcome, and you want me to sign on the dotted line? Why would I do that, right?” But that’s what we’re asking people to do. It is, it sounds pretty insane, and you’ve probably heard this from your detractors, “Well, I can’t possibly give a fixed price because there’s so many things about an engagement that I just don’t know, or the customer could change their mind, or right, we could have scope creep, whatever.” It’s like, listen, if I’m on the stretcher and being wheeled into the OR, the last thing I want to see is the surgeon standing over me going “Oh wow, look at that, I’ve never seen that before.” I mean, the fact is if you don’t know the job that you’re quoting or bidding on or filling out an RFP for, then possibly maybe you shouldn’t be doing it. I don’t want to go to a heart surgeon who dabbles in it on the weekends. I want somebody who does this for a living, has done it a million times, knows what they’re doing. I think that’s a function of positioning and specialization and all of that because let’s face it, we don’t hire firms or agencies or professional firms for a wide array of full-service offerings, we hire them for something specific, and we want the best in class and we need it.

Transitioning from Generalization to Specialization

Shots are fired, you’re opening up another can here, which I’m in the same camp as you, is whether you should specialize or generalize. But if I were to say, “Okay, Ron, I hear you, I believe in you, I believe in this idea you’re preaching to me, I get it, I’m feeling the faith, the spirit move in me, but I’m a new person in a business, so what am I supposed to do? Do no business, or is there a way that I can progress from one model to the next?”

Look, it’s a great question. We’ve all been through this, and I’m the worst defender. When I launched my practice, I was young, hungry, and the client or customer criteria was “Do you have a checkbook and the mirror test? If I put a mirror in front of you, does it fog?” And if you met those two criteria, then you were a customer as far as I was concerned. I didn’t care about anything else. Now, even if the mirror didn’t fog… CPA so…

The Importance of Specialization and Pricing Strategy

That’s what we need to get from our customers. That’s what I mean by best curbside appeal so I’m glad you said that future desired state. Okay, so there’s an interesting thing that happened in this illustration. The first one where the person came out, looked at your yard and ultimately just told you their hourly price. So then it begs the question, do they even need to come out? Do they even need to look at the yard? Why not just tell you, “You want to hire me, it’s 40 bucks an hour,” right? It’s a great question. Maybe they just wanted to make sure or something, or maybe they have different hourly rates and they think that’s a form of price discrimination depending on how big the yard is or how nice the neighborhood is. Could have been a million things but it’s not sophisticated pricing and I see this in the trades a lot. I’m amazed by it. I had my house painted a few years ago got tunnel windows it’s a big two-story house and when I had three quotes and not one of them not one of them offered me options and that is such a serious mistake you’ve got to offer your customers options because it changes the frame of mind and the customer from should I work with Chris to how should I work with Chris and that’s very very powerful and if you’re not offering options then you’re not doing that and this is why every business on the planet gives us options except businesses that bill by the hour [Music] it’s the opposite it’s like a bizarro world when it comes to people in professional services space right yep where everywhere else we have pricing certainty and we have pricing options and we understand that we participate in that and then for some reason when we enter into our own business we put on a special invisible helmet that says in this world those rules do not apply and we’re asking our customers all the time to say like okay so I have no idea how much this is going to cost I know what it’s going to cost you and I have no certainty of outcome and you want me to sign on the dotted line why would I do that right but that’s what we’re asking people to do it is it sounds pretty insane and you’ve probably heard this from your detractors well I can’t possibly give a fixed price because I there’s so many things about an engagement that I just don’t know or the customer could change their mind or right we could have scope creep whatever it’s like listen if I’m on the stretcher and the and being wheeled into the or the last thing I want to see is the surgeon standing over me going oh wow look at that I’ve never seen that before I mean the fact is if you don’t know the job that you’re quoting or bidding on or filling out an rfp for then possibly maybe you shouldn’t be doing it I don’t want to go to a heart surgeon who dabbles in it on the weekends I want somebody who’s does this for a living has done it a million times knows what they’re doing I think that’s a function of positioning and specialization and all of that because let’s face it we don’t hire firms or agencies or professional firms for a wide array of full service offerings we hire them for something specific and we want the best in class and we need it shots are fired you’re opening up another can here which I’m in the same camp as you is whether you should specialize or generalize but if I were to say okay Ron I hear you I believe in you I believe in this idea you’re preaching to me I get it I’m feeling the faith the spirit move in me but I’m a new person in a business so what am I supposed to do do no business or is there a way that I can progress from one model to the next it look it’s a great question we’ve all been through this and I’m the worst defender when I launched my practice I was young hungry and the client or customer criteria was do you have a checkbook and the mirror test if I put a mirror in front of you does it fog and if you met those two criteria then you were a customer as far as I was concerned I didn’t care anything else now even if the mirror didn’t fog cpa so

Reevaluating Business Practices and Self-Esteem in Pricing

we can still do some estate work but what happens when you have that mentality of taking every dollar chasing every customer you know never met a billable hour I didn’t like which is why because our business model incentivizes activity and it incentivizes billing time then we’re going to look at every possible hour as a good thing even though we all know not all clients are equal will happen over time is you will get a practice of very low-value customers they’ll refer other low-value customers other price-sensitive customers and if you’re in that situation there are some strategies that you can do but if I was starting over I realized that if you specialize it’s going to be it could be slower growth but it’s going to be more profitable growth it’s going to enable you to have a bigger impact I remember a guy who started a cpa firm with nothing and all he did was breweries and today he has breweries around the world why because he speaks at their conferences he writes in the magazines that they read he pushes out content that is really really relevant to a microbrewery and so he’s perceived as the expert now it took him a couple years to build it up but he was able to build it up and I think the internet now and all the technology we have you could probably do it even quicker but when you think brewery you think this guy and that’s the kind of positioning in the market that you want I mean Chris you and I will fly to rochester minnesota to go consult an oncologist that deals with a specific type of cancer that we might have been diagnosed with we’re not going to do that for a general physician we’re going to google our zip code so when you’re a specialist you attract from a much wider geography if not the whole world you work on more interesting cases and you can charge higher prices because you’re perceived as delivering higher value okay there’s so many different ideas here and I’m trying to imagine myself as the person who’s still holding on with their fingernails to these old ideas for whatever reason their mindset or maybe a set of limiting beliefs tells them that this is not possible I can’t choose a field to specialize in because I’ll lose out on customers I can’t ask the customer for more money or to value-based pricing because that doesn’t work you talk about this in terms of like self-esteem as a big part of pricing can you expand on that yeah self-esteem uh this is something that I learned early on after teaching this and publishing my first book was that I would get those types of reaction think a lot of professionals really question their ability to add value and I think that’s a self-limiting belief obviously I mean it’s not an expansive mindset to think that you don’t add value obviously if you’re serving customers and they’re paying you each dollar they pay you is kind of like an applause there are certificates of performance when you’ve served somebody else to the point where they voluntarily turn over to you more cash or less cash than the value that you brought to them so obviously it’s a win-win but self-esteem or if you want to call it self-respect or something else is basically the reputation we have with ourselves that’s your first sale

if you don’t believe you’re worth 10 times 20 times 100 times your hourly rate whatever that may be then guess what your customers will never think it either apple certainly doesn’t have that limiting belief any other like you mentioned luxury good company doesn’t have that limiting belief certainly porsche lamborghini I wish lamborghini had that limiting belief I hey it’s just a car come on look I can look and get a kia for 20 grand like come on you guys just the car um no they they understand their value but I do think self-esteem is a big thing I also think there’s some people and I’m not sure how many but it’s quite a few who kind of been taught brought up money is the root of all evil you know and those types of whether it’s religious or some other type of thing you know the rich man will never get into the kingdom of heaven and all that but it’s the love of money that’s the root of all evil making money is whether it’s biblical or whatever but it’s a way that we serve one another it’s the most noble thing in the world to be able to serve a stranger you know I get on an airplane the pilot doesn’t know who I am we may have different political beliefs we may be of different religions or ethnicities he doesn’t even know why I’m flying to where he’s go or where we’re all going but he’s enabling me to earn money I’m putting my life in his hands my trust in my airline is probably greater than my trust in my doctor when you really think about it and get on an airline I know we don’t think about this and that’s a good thing but when you step back and think about it you’re like whoa wait a minute that’s kind of amazing and all the engineers at boeing

The Role of Self-Esteem in Business and Pricing Strategy

That’s what we need to get from our customers. That’s what I mean by best curbside appeal so I’m glad you said that future desired state. Okay, so there’s an interesting thing that happened in this illustration. The first one where the person came out, looked at your yard and ultimately just told you their hourly price. So then it begs the question, do they even need to come out? Do they even need to look at the yard? Why not just tell you, “You want to hire me, it’s 40 bucks an hour,” right? It’s a great question. Maybe they just wanted to make sure or something, or maybe they have different hourly rates and they think that’s a form of price discrimination depending on how big the yard is or how nice the neighborhood is. Could have been a million things but it’s not sophisticated pricing and I see this in the trades a lot. I’m amazed by it. I had my house painted a few years ago got tunnel windows it’s a big two-story house and when I had three quotes and not one of them not one of them offered me options and that is such a serious mistake you’ve got to offer your customers options because it changes the frame of mind and the customer from should I work with Chris to how should I work with Chris and that’s very very powerful and if you’re not offering options then you’re not doing that and this is why every business on the planet gives us options except businesses that bill by the hour [Music] it’s the opposite it’s like a bizarro world when it comes to people in professional services space right yep where everywhere else we have pricing certainty and we have pricing options and we understand that we participate in that and then for some reason when we enter into our own business we put on a special invisible helmet that says in this world those rules do not apply and we’re asking our customers all the time to say like okay so I have no idea how much this is going to cost I know what it’s going to cost you and I have no certainty of outcome and you want me to sign on the dotted line why would I do that right but that’s what we’re asking people to do it is it sounds pretty insane and you’ve probably heard this from your detractors well I can’t possibly give a fixed price because I there’s so many things about an engagement that I just don’t know or the customer could change their mind or right we could have scope creep whatever it’s like listen if I’m on the stretcher and the and being wheeled into the or the last thing I want to see is the surgeon standing over me going oh wow look at that I’ve never seen that before I mean the fact is if you don’t know the job that you’re quoting or bidding on or filling out an rfp for then possibly maybe you shouldn’t be doing it I don’t want to go to a heart surgeon who dabbles in it on the weekends I want somebody who’s does this for a living has done it a million times knows what they’re doing I think that’s a function of positioning and specialization and all of that because let’s face it we don’t hire firms or agencies or professional firms for a wide array of full service offerings we hire them for something specific and we want the best in class and we need it shots are fired you’re opening up another can here which I’m in the same camp as you is whether you should specialize or generalize but if I were to say okay Ron I hear you I believe in you I believe in this idea you’re preaching to me I get it I’m feeling the faith the spirit move in me but I’m a new person in a business so what am I supposed to do do no business or is there a way that I can progress from one model to the next it look it’s a great question we’ve all been through this and I’m the worst defender when I launched my practice I was young hungry and the client or customer criteria was do you have a checkbook and the mirror test if I put a mirror in front of you does it fog and if you met those two criteria then you were a customer as far as I was concerned I didn’t care anything else now even if the mirror didn’t fog cpa so

Serving Different Beliefs in Commerce

Who designed that plane and built that plane and the ground crew and the maintenance people that keep it up they’re all serving me and yet we may be completely different in terms of what we believe and our religions and all we may be at war with one another but when it comes to commerce they’re serving me and they’re providing me with more value, and I think that’s kind of amazing. It’s a miracle when you think about it. Okay, tying it to an idea in the book is that if we focus on creating value for the customer transformation that’s how we’re able to get to a place where we’re valued more and get paid more, and I hear this a lot like no I’m really taking care of my customers I’m creating a lot of value for them but yet I’m not making any money so something is off there. Ron, do you have any ideas as to what might be wrong?

Yeah, when I hear that I’m not making any money it’s usually indicative of a pricing problem. I mean sometimes if they got bloated overhead or they signed too big of an office space or something entered into a lease or whatever but it’s usually a pricing problem and there could be multiple causes self-esteem being one of them just not being specialized or niche enough to recognize the type of customer that you want. I mean I do believe all professional firms are defined by the customers they don’t have. We really are we’re defined by the services we don’t do and the customers we don’t have just like a generalist versus specialist doctor is defined that way and if you’re trying to be all things to all people that’s not a great business model at all never going to get anywhere and so if I hear from somebody I’m not making enough money they’re probably undervaluing themselves so that gets into the self-esteem part right once again or perhaps they’re actually delusional and actually not creating the value that they think they are. Sometimes they price too high but you know what 95 of pricing mistakes are because the price is too low I very rarely see anybody gone bankrupt because their prices are too high. Concord might be an exception yes, you know it was not economically viable again proving the point that price justifies cost and what justifies a price is the value and the customers didn’t see the long-term value in the Concord.

Subscription Business Model

You’ve authored seven best-selling books a rumor on the street is there’s another book that you’re working on is that true that is true and it’s going to be on what I’m just affectionately calling with people I talk to about this value pricing 2.0 which is really a different business model it’s not really fair to call it just pricing it’s a different business model it’s a subscription business model because I believe we’re living in the subscription economy and it’s just a tsunami we’re seeing more I can’t even keep up with it’s like drinking from a fire hose I believe Teenzo who is the author of subscribe the book subscribed and also the founder of Zora which is a subscription-based software platform that enables you to run a complete subscription business now of course he’s got a vested interest in saying this but he says in five years time you won’t own anything but yet you’ll subscribe to everything you won’t buy everything you’ll subscribe to everything now I’m not willing to go that far because I think ownership on some things is still kind of important to people but I will say this in five years time you’ll have the option of subscribing to everything and even if your business doesn’t move to subscription it’s gonna be confronted with it via your competitors and so it was really interesting to read and I forgot I’m sorry I think it’s called Shuttle Rock they’re a creative agency that is offering subscription and so we’re starting to see this in accounting firms law firms across professional we’re kind of laggards but the big example that I hold up and talk a lot about on the show with Ed Class my co-host is concierge medicine and direct primary care when you subscribe to the firm rather than being engaged in a transactional relationship you move from transactional to relational with subscription and everything’s about that relationship and basically that doctor is telling you whatever you need medically that we can do under our roof and there’s the scope it’s only things we can do if you need an oncologist we need a cardiac surgeon we’re going to refer you out and that’s not covered by anything we can do and by the way what we can do is continuously expanding as we add MRIs as we add pharmacology as we add other services and by the way when that happens we don’t necessarily change your price just like amazon doesn’t change our price when they drop a new show that we love that we’re binging on and what I love about that is it just says whatever you need you’re covered stop trying to look at the math of the moment and compare the lifetime value of that relationship what you’re doing there is creating an annuity it’s going to make your firm more valuable it’s going to command a higher sales price and it’s probably going to be more profitable and it’s as scalable as you want but it just gives that customer peace of mind convenience and a completely frictionless relationship anything I need I’m covered there’s no hurdle there’s no friction to oh I cut my hand should I call the doctor and go get stitches no he’ll come out to the house now they’re able to do that because they work with fewer patients they control their capacity so the average general physician in the US has 2400 panel of patients that’s why you get to spend a total of seven minutes with your doctor half the time they’re looking at a screen typing in on electronic health records a concierge doctor only has 600 patients at most and that way they can provide you office visits and home visits and same day visits tell them they were doing telemedicine and texting and email long before COVID they’ve been around since 1996 that’s the model this is super fascinating Ron I’m trying to get my head wrapped around this I can feel inside my body some concepts of resistance and I know that means that this is a powerful idea and I want to ask you a couple questions about this I think a lot of us who grew up in the 80s and the 90s and before then ownership was a big idea and we wanted to own things I bought albums I bought CDs and cassette tapes and when things went streaming I’m like no I’m going to continue to buy CDs and you know what I do I buy the CD and then I download the version the digital version and so we’re moving in this way where we’re becoming I guess more and more dematerialized in terms of like we physically own and we’re okay with a concept but if you think about movies you think about music ride share right a lot of young people don’t now don’t need to get a driver’s license they don’t need to own a car and deal with insurance someone else can pick them up you don’t have to worry about parking we’re sharing homes and Airbnb and so it’s like this concept is taking root but I see these things as as products not so much as services with some exceptions obviously do you have some examples that you can point to to say here’s someone who’s on the edge who’s in the creative service professional space or just the professional space that are moving to this where you can cite specific how they’re doing because I’m so curious about this concept yeah but there are many examples actually there’s a lot of law firms doing it and just like we saw at the value pricing 1.0 it’s being the innovation the experimentation is being done at the small firm level but we had.

Subscription Success Stories

A CPA from Summit CPA, Jody Grunden, moved to subscription services where he provides part-time CFO services. So they’ll do all your accounting and tax work and all of that, and I think when he converted to subscription his revenue was 600 grand under fixed pricing he used I think, and then he started to do subscription and kind of moved up market, he specialized in, I think he specializes in marketing agencies actually, and he has different packages so he offers different packages which you can see right on his website at Summit CPA, and he has a weekly payment schedule which is interesting most subscriptions are monthly he does weekly and I believe now his firm is up over seven million dollars in the interim so he’s really scaled and he says it’s all due to subscription because with the subscription that puts the relationship at the center.

So I’ll give you a couple of examples of this of how this is different than a transaction today if you go to Porsche Drive you can subscribe and you will get depending on the package that you pick but I’m going to look at the top package which I think is 3,500 a month it’ll give you access to, I think it’s six or eight models of Porsche, there’s an SUV in there there’s convertible different cars and you can swap out cars as much as you want and they’ll white glove out the new one and take away the old one they pay for everything except gas and insurance I mean gas and tolls they pay insurance they pay everything if you need maintenance they just come out take it and keep, you know white global loaner and you can trade out as much as you want so I can say hey I got guests coming this weekend they want to go wine tasting I need an SUV I’ll get an SUV and I’ll take my convertible and then Monday I call and say I want my convertible back and they’ll bring it back this is great people say well how’s it different than a lease or buying a Porsche it’s not tied to a car you’re subscribing to Porsche you now have a one-to-one relationship with Porsche they know everything about you you buy a Porsche they don’t know anything about you you subscribe to Porsche and now they have all these analytics they know where you drive they know where you go they know how much you know everything they know what kind of music you like they may know other things about you that relationship is completely different than the transaction completely psychologically it’s completely different to subscribe to a business rather than buy something from them.

Apple should be doing this apple does do this with services iCloud iTunes itv blah blah blah why can’t I subscribe to apple and apple just says oh you need a new watch here you go need a new laptop here you go no they could put some rules around it I can’t do it every day I get you know every two years or whatever why can’t I subscribe to apple that’s a different relationship it’s more valuable and it locks in loyalty and it’s an amazing thing the other one and this might apply more to this is a version of subscription I think some professional firms could use there’s an outfit called hassle-free home services you’re going to want to look this up it’s a franchise and you subscribe to these guys I think it’s like 250 a month and they come out and they handle your weekend to-do list all the crap around your house that you do not want to do fix the broken light outside change the you know smoke detectors uh they drain a half a cup of water from your hot water heater which I didn’t even know you needed to do check your filters there’s a whole list on their website of all the maintenance things that they do just all the piddly stuff that you just have to do on the weekend and then if you want to like say remodel a kitchen or build you know remodel a bathroom or build a deck they’ll do that too and you’ll probably get a preferred price and they’ll manage it and take care of the contractors and all of that and of course if you’re subscribing to these people who are you going to hire they’re in your house once a month doing all this who are you going to hire to do these bigger jobs each franchise on average earns 50 of their revenue from those one-off projects but the way they get them is they subscribe my colleague talks about this he loves it and this is more internet of things but this is fascinating to me he’s got one of those irobot vacuum cleaners and it does everything it did you know you have an app on your phone and it maps your upstairs and downstairs even and it figures out where everything is and then it when it’s done vacuuming it goes and plugs itself back into its port it empties its bag and it talks to the mother ship at home and they figure out if you need new brushes and if your bag’s almost full and needs to be empty they’ll send you text messages and they just mail you the parts he subscribes to his vacuum it’s like i forget the amount so i want to say it’s 30 it’s 30 bucks a month but here’s the thing first off he’ll be subscribing for the rest of his life you know probably as long as he’s got a house that he has to vacuum and second they just didn’t go to the market with their standard offering they plused it as walt disney would say constantly plus you can’t do subscription without upping your game because it’s a different business model and common services don’t command uncommon prices and that’s what i love about the concierge service if you tell a customer hey anything you need you need a logo you need i’m just going to start a new business or whatever you need a logo over there you can still have options you can still put some boundaries around it just like the home service outfits do but just telling them giving them that peace of mind that hey you’re covered if you need this and that way you don’t have to go to the department of paperwork and fill out a change request when there’s scope creep and have a conversation blah blah blah this is no no we’re just going to do a series of serial transformations to continuously help you because the thing about a subscription is all about recurring value recurring frictionless peace of mind value who better than professionals to do that and there’s lots of ways to do that and i think customers will pay for that peace of mind we all buy insurance and we love it when we don’t use it so fascinating psychology if you think about it i’m in ron i am in that might have been a little resistant at first when the heck is this book coming out probably the end of 2022 i’m actually writing it with paul dunn and he’s the guy that i wrote the firm of the future with and that book was published in 2003 and that book was one.

Embracing the Subscription Model

Subscription-based services are revolutionizing various industries, from accounting to healthcare. One notable example is Summit CPA, where Jody Grunden transitioned to offering part-time CFO services through subscription plans. His firm’s revenue soared after adopting this model, showcasing the power of subscriptions in transforming businesses.

Porsche Drive: A Different Kind of Ownership

Porsche Drive offers a subscription service where clients gain access to a range of Porsche models. This innovative approach isn’t just about leasing or buying a car; it’s about subscribing to Porsche itself, forging a personalized, data-rich relationship with the brand. This shift in perspective from ownership to subscription demonstrates the evolving consumer mindset.

Hassle-Free Home Services: Simplifying Home Maintenance

Hassle-Free Home Services exemplifies the subscription model by handling all household maintenance tasks for a monthly fee. From fixing lights to remodeling, subscribers enjoy peace of mind knowing their home is taken care of. This service not only saves time but also ensures consistent, high-quality maintenance.

iRobot Vacuum Cleaner: A Subscribed Cleaning Solution

The iRobot vacuum cleaner offers a subscription model where users pay a monthly fee for maintenance and updates. This approach not only ensures the device’s longevity but also provides ongoing support and enhancements. By subscribing, users access a hassle-free cleaning solution tailored to their needs.

The Concierge Medical Practice: Prioritizing Patient Care

Concierge medical practices, like Direct Primary Care (DPC), prioritize patient relationships over transactional interactions. By subscribing to these services, patients gain access to comprehensive care and personalized attention. This model emphasizes quality over quantity, addressing physician burnout and improving patient outcomes.

Looking Ahead: The Subscription Economy

As industries continue to embrace the subscription economy, professionals must adapt their business models to thrive in this evolving landscape. The transition from transactional to relational interactions requires a fundamental shift in mindset and approach. By prioritizing customer value and fostering long-term relationships, businesses can unlock new opportunities for growth and sustainability.

Connecting with Ron Baker

Ron Baker, a leading advocate for value-based pricing and the subscription model, shares valuable insights through his podcast, “The Soul of Enterprise,” and his think tank, Verasage Institute. His forthcoming book, “Value Pricing 2.0,” promises to explore the subscription model’s potential further. As businesses navigate this transformative journey, Ron’s expertise serves as a guiding light towards a subscription-driven future.

In conclusion, the subscription model offers a paradigm shift in how businesses engage with customers, emphasizing ongoing value and relationship-building. By embracing this model, professionals can unlock new opportunities for growth, sustainability, and customer satisfaction in an increasingly subscription-driven world.