A couple of replies to yesterday email focused on 2 things re: pricing.
Decision-making
and Costs.
Decision-making
Long time reader and AI specialist Genevieve Hayes pointed out (shared with permission):
“All these pricing formulae are just examples of decision rules. And as we’ve discussed on many occasions, they are there to guide you, not to be blindly followed.”.
She’s absolutely right.
The thing is though, that almost everything taught is taken from the view that costs determine price. No matter the formula, the process is the same. Cost → Price.
Re: Costs.
Doesn’t it make sense to know your costs BEFORE giving a price?
While it makes sense to know you’ll be profitable in an engagement, it’s not your costs the ones that determine the price. Again, this view takes Cost → Price.
However…
What if you first define what your customer values?
Then set a price that is reasonable for them?
And only then, make sense of what could be reasonable in your costs to make it profitable? What could I offer for this price so it’s a win-win?
Value → Price → Costs