Value Pricing is more than just a Happy Meal

I was talking recently with my #ProfServ co-moderators Alan Berkson and Kelly Craft about Value Pricing and all I could think about was McDonald’s. No, I’m not a fan of their food and haven’t eaten there in ages – it was their product & pricing strategy that kept coming to mind, what they call their Meal Bundles: the Dollar Menu, the Extra Value Meals, the Mighty Kids Meal and the every-kid-must-have-one Happy Meal.

McDonald’s became a leader in the fast-food services industry in part by bundling groups of items, offering certain loss-leader products and building a multi-faceted “loyalty” approach that kept people coming back for more (games like Monopoly and indoor play-houses are good examples here). Forget about the actual “cost” of their product, they created a fun “experience” that people are amazingly willing to pay for.  Even my son admits that their burgers aren’t as tasty as the ones that we grill in the back yard, but every time we pass a McDonald’s his 8yr old brain shouts “Can we play at McDonald’s? Can I get a Happy Meal with a toy?”

McDonald’s has Value Meals, not Value Pricing.

Thinking back, that is not that dissimilar from what we did at my first consulting firm. We offered bundled packages of services, we gave away a certain amount of loss-leader content (writing, white papers, telephone calls) and almost always included some type of longer-term retainer to monitor the progress after we had completed the initial effort (and build that long-term, come back for more, relationship).  But unlike McDonald’s, we had the ability to create a flexible pricing structure and we leveraged that as much as we possibly could.

In the beginning, our pricing structure was designed to cover our expenses and make a certain level of profit on each engagement. Across the board, our pricing was fairly uniform client-to-client. But over time, as our “brand” grew and our client base expanded, we gradually adopted a different approach that took advantage of the demand, or value, that we were providing to our clients. Rather than trying to maintain a certain level of profitability, we started to look at how much certain clients were willing to pay for our services. Gone were the fixed hourly rates, replaced by a flexible pricing approach that was different for each client. It was, for us, the beginning of Value Pricing.

Value Pricing is about finding a client’s pain and fixing it. More cure = more value.

In Value Pricing, the goal is to match your price to the level of value that the client receives from your services. Forget about what your competitors are charging, or what your costs/expenses are, focus on the value that you bring to the client. To be more precise, think about the value the client believes you are providing. If they believe the value you are bringing to the table is high, price accordingly. Conversely, if they believe the value you are bringing to the table is low, you probably shouldn’t be there in the first place.

Here are some guiding principles to Value Pricing that help define the concept as it applies to professional services:

  • Value Pricing is NOT the same as “Compensating for Value” in the financial market.
  • Value Pricing is determined and agreed to by the customer ‘up front” in advance of the actual engagement.
  • Deferred “bonus” payments – typically based on operational or sales improvements – can be considered part of Value Pricing if you really intend/expect to meet or exceed the clients goals.

For Value Pricing to work in the professional services sector, my experience has shown that there are several key items that need to be in place:


Your “brand” and reputation must equate to quality. If you aren’t bringing extraordinary quality to the table, you will never be able to convince a client of your true value. The interesting part about quality is that it goes well beyond just the service that you deliver, it’s something that must come through in all of your dealings with a potential client, before, during and after the engagement is over.


If a client doesn’t completely, totally, without reservation trust you, Value Pricing is simply not going to work. Trust is most often conveyed through experience and references, but it is also something that you must proactively promote. How? Ask your past clients for that reference, the letter of recommendation, the endorsement. And when you get it, don’t hide it, put it out there. Especially in the era of social media, get that word out there. Or better yet, get others to promote it for you.


In order for Value Pricing to work effectively, you have to really understand the needs (and urgency) of the client. Taking this further, you need to think like the client – put yourself in their position and figure out where their real pain point is and how quickly it really needs to be solved. Often, what they really need and what they say they need are two totally different items. Many times I’ve gone into a potential client meeting to discuss a particular subject only to find that there is a different, perhaps more urgent, issue that needs to be addressed. In some cases, these needs are totally unrelated to the original need, in others, they are the root cause of problem they need fixed. The only way to figure this out is to listen to the client, analyze their business model and start asking questions. Sometimes you’ll be surprised at the opportunities the answers lead to.


Here it is in a single word. Guts. You have to have (as my grandfather used to say) the “gumption” to take the risk and Value Price your services. I have yet to see a client offer to pay me more than I’ve asked for. If you aren’t willing to ask your client to pay based on the client’s perceived value, you are better off sticking with your standard hourly rate.

There are other factors that go into making Value Pricing work for your business, and being able to not only sell the value of your services but understand the perceived value that a client is receiving is not always an easy task. But when it is done right, it is a win/win for both you and your client.

What are your thoughts? Do you use Value Pricing as part of your business strategy? Has it worked, failed? Leave me a comment below and let me know. The more we share about our own experiences, the more successful we all become, and the level of client satisfaction that we deliver improves.

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Thanks for reading – Fred.

UPDATE: Note that his post was updated after our last #ProfServ Twitter chat. @Provserv is held on alternate Thursdays at 10pm ET. Hosts are Alan Berkson (@berkson0), Kelly Craft (@KRCraft) and Fred McClimans (@fredmcclimans).

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  • http://www.22ndstorystrategies.com Joseph

    Great post Fred. You expressed the key here very explicitly in two specific statements: (1) We must be willing to ask for it and (2) We must match our price to the level of value that the client receives from the services provided.

    The whole issue of hourly pricing is a question of the value you assign to your involvement. If getting paid by the hour is one’s chosen method then he is committing himself to the maximum number of dollars earned based on the hours he can generate billings at the chosen (or published) hourly rate — might as well be punching a clock :-)

    BTW: I suspect the comparison to McDonalds may ignore the principle… I assume that McDonald’s (to further its brand promise) looks for the lowest price they can charge above the cost of delivery. That’s not value pricing in my mind at all. In fact value pricing to me is about finding the highest price that the client is willing to pay and still feel like they got a great deal because of the value delivered. It is implicit that value pricing generates high margin above the cost of delivery… otherwise what’s the point?

    • http://fredmcclimans.com Fred McClimans

      Joseph – Thanks for the feedback. You are dead on regarding hourly billing – just like punching a clock and extremely self-limiting.

      Regarding McDonald’s, no, they don’t practice Value Pricing, despite the “Value” tag they place on certain menu items. For them, it is purely a cost+profit% model, just like my first consulting business where we initially charged by the hour (hence the comparison between McDonald’s and my first business).

      I appreciate your feedback and look forward to more conversations.


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  • Guy Letts

    I agree with the article, but surprised by “I have yet to see a client offer to pay me more than I’ve asked for”. In contrast, I’ve just offered to pay a designer extra on a fixed price deal because I was aware that he had put in more effort than he had expected in order to get the job done to the right standard.

    However I only did it because he had first established the principles you highlighted above – quality, trust and understanding. I’m a great believer in encouraging the good guys. (And just to clarify, it was my money not ‘the company’s’ – I’m running a startup, but I’ve seen the long term value of investing in relationships)

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  • http://fredmcclimans.com Fred McClimans

    Guy – I like your style: rewarding for a job done above and beyond the call of duty. When I mentioned the comment about “pay me more than I’ve asked for” that was a reference to a client hearing what my fee would be and then upping it on the spot – in advance of the job completed.

    In your situation, which I have also run into with a client looking to improve their market influence, you offered after the fact to further compensate an individual based on the level of work that was performed. That, in and of itself, is a rare occurrence and I applaud you for taking that step. All too often people think of the consultant/analysts/worker as being responsible for establishing & maintaining the client/customer relationship. It is refreshing to see that there are still clients who value the relationship with their own providers as much as you do.

    Congrats on your position, and thank you for the feedback. – Fred

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