{"id":102410,"date":"2022-09-23t12:00:48","date_gmt":"2022-09-23t16:00:48","guid":{"rendered":"\/\/www.g005e.com\/?p=102410"},"modified":"2024-08-14t09:30:09","modified_gmt":"2024-08-14t13:30:09","slug":"how-utility-and-value-affect-pricing","status":"publish","type":"post","link":"\/\/www.g005e.com\/2022\/09\/23\/how-utility-and-value-affect-pricing\/","title":{"rendered":"how utility and value affect pricing"},"content":{"rendered":"
<\/a>eight kinds of utility and four perceptions of value.<\/strong><\/p>\n by august j. aquila<\/i><\/a><\/p>\n if indeed we believe the phrase \u201cperception is reality,\u201d then it is the client\u2019s perception that is the only reality. ultimately, only a client can determine the value of your service, that is, the fee he or she is willing to pay. if the client perceives that he or she has received a benefit there will be some perceived value attached to the service.<\/p>\n more: <\/b>how competitors drive pricing<\/a> | how to leverage demand in your pricing<\/a> | the four phases of service life<\/a> | what we know about pricing strategies<\/a> | make the most of your marketing mix<\/a> | marketing orientation is what firms need<\/a> | when hourly billing hurts profits<\/a> consciously or unconsciously, the client\u2019s determination of the correct fee for a service is related to two concepts: utility and value. let\u2019s look at these two concepts and how they apply to setting prices. utility is often defined as the ability of a service to satisfy\u00a0 the needs or provide the benefits that the client or prospect is seeking. it is the utility of benefits of a service that ultimately determines its value. the higher the service\u2019s utility is to the prospect or client, that is, the more it satisfies a client\u2019s need, the more the value to the client.<\/p>\n utility increases value, and value is then translated into the price that someone is willing to pay for a product or service. a client can receive eight kinds of utility from a firm that offers accounting, tax or business consulting services. each is discussed below.<\/p>\n how clients perceive value<\/strong><\/p>\n although we hear and read a lot about value, it is one of those terms that seems to be elusive. what one person considers a value, another may consider a great expense. for example, what is the value of a business that is for sale? is it a future stream of cash flow? is it some multiple of current sales? is it the price that you would get on an auction block, or is it merely the price that a willing buyer would pay for the company?<\/p>\n value has many definitions, depending on how you use the word. for example, in accounting, value is the monetary worth of an asset or service rendered. in economics, it\u2019s the worth of all the benefits and rights arising from ownership. two types of economic value are (1) the utility of a good or service, and (2) the power of a good or service to command other goods, services or money in a voluntary exchange. in marketing, value is the extent to which a good or service is perceived by its customers to meet their needs and is measured by the customer\u2019s willingness to pay for it.<\/p>\n let\u2019s define value as the measure of what benefits the client perceives have resulted from the accountant\u2019s effort. from this standpoint the value of any service is what a client is willing to pay for the perceived benefit, tangible or intangible, that he or she receives. the emphasis is on the word benefit.<\/p>\n client-centered firms realize that they have to understand the client\u2019s perception of the firm\u2019s services and the benefits the client receives from the services.<\/p>\n hence, it is necessary that a basic shift in the service provider\u2019s focus needs to take place. the shift is one from the service we provide to the benefit or perceived value the client receives. this is the first step in moving away from the hourly billing paradigm and creating a new billing paradigm wherein we learn how to understand the perceived value that a client receives and bill for the value of that benefit accordingly, irrespective of the time spent.<\/p>\n \u201cattracting loyal customers based on price is like believing in the tooth fairy.\u201d \u2013 colin myles, \u201chow to avoid business failure: 7 steps\u201d<\/p><\/blockquote>\n the fee charged is really nothing more than the exchange value of the service provided. the exchange value is determined by the client. clients will tend to pay whatever they feel a service is worth. if clients think that the fee for a particular service is too high, they will not buy it or will argue with the service provider. if this happens, you generally have two choices, either lower your prices or lose sales. after all is said and done, the value of a service is established by the marketplace, which also includes the impact of competitors\u2019 prices and overall demand for the service. fee evaluations by clients are also influenced by other factors, such as competition, perceived expectations, what they are used to paying for a similar service and even the psychological makeup of the client.<\/p>\n when i ask clients how they perceive the value from services, they give answers that are consistent with the conclusions that can be drawn from client satisfaction surveys that i have conducted over the years. the four main value perceptions are the following:<\/p>\n in another example, two physicians want to dissolve their partnership. you represent one of them and assist this physician through the entire process, saving the physician not only a great deal of money, but also much mental anguish.<\/p>\n there are things that you can do to help your clients perceive a higher value in you and your services. these are not activities that will immediately increase your fees, but if done consistently, they will reinforce to your clients the added value that you bring to them. innovative firms realize that it takes more than just a seminar or newsletter to provide added value to the client. everything revolves around the personal relationship that ultimately develops between the professional service provider and the client.<\/p>\n exactly what is that relationship and how does it translate in higher fees? everything that you do for a client ultimately has to have an impact on the client\u2019s future, his or her personal success, the profitability of his or her company, the security of his or her estate, and so on.<\/p>\n completing the questionnaire below will show you how much added value you are currently providing to your clients.<\/p>\n value-added questionnaire<\/strong><\/p>\n consider the following ways that value can be added to your services. for each way, rate yourself and your firm as to how well you do. if you are doing an outstanding job, give yourself a 10; if you are doing an extremely poor job, give yourself a 1. most likely you will rate yourself between these two extremes. any questions that receive a rating below 7 or less should be reviewed carefully to see how you could improve the rating.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":"
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\nhow clients perceive utility<\/strong><\/p>\n\n
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\n <\/td>\n me<\/strong><\/td>\n my firm<\/strong><\/td>\n<\/tr>\n \n 1. i fully understand the scope of the project and its importance to the client.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 2. i am a good listener, so i pick up the client\u2019s pain level.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 3. i also discuss with the client, before submitting the fee proposal, what they think the project is worth.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 4. i am always straightforward with clients. if nothing needs to be done or if there is a less expensive way to proceed, i tell them.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 5. because of previous interactions with my clients, they call me before they make major decisions. this prevents them from taking inappropriate actions.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 6. i review with clients all profit-saving ideas suggested and implemented during the year.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 7. i offer to all clients a satisfaction guarantee for any services provided.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 8. i have deep understanding of the client\u2019s business and can supply a high level of expertise and skill, which is either through my own or through the network of other professionals in our firm.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 9. i have certain skills, such as negotiation skills or valuation expertise, that are hard to find elsewhere.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 10. i care about my client\u2019s well-being and needs and regularly provide support.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 11. clients can count on me for providing timely services and being responsive.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 12. i provide advice that keeps clients from exposure to financial and operational risks.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n \n 13. i have created a positive personal brand in the market as a highly regarded professional. centers of influence often recommend me to their clients.<\/td>\n <\/td>\n <\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n