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Implementing Value Pricing: A Radical Business Model for Professional Firms by Ronald J. Baker

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CHAPTER 8

Your Firm’s Value Proposition

The secret of staying afloat in business is to create something people will pay for.

—Thomas Edison (1847–1931)

Fortunately, more firms now realize it is not enough to focus on simply the value of the service being offered; they have to take into consideration the total experience from the customer’s vantage point. They have to provide a value proposition that, when compared with the customer’s viable alternatives, offers a better deal. The originator of the value proposition, Michael J. Lanning (a former Procter & Gamble executive and consultant with McKinsey & Company), defines it this way in his book Delivering Profitable Value:

Essentially, a value proposition is the entire set of resulting experiences, including some price that an organization causes some customers to have. Customers may perceive this combination of experiences to be in net superior, equal, or inferior to alternatives. A value proposition, even if superior, can be a “Tradeoff,” i.e. one or more experiences in it are inferior while others are superior.

(Lanning 1998: 55)

When most firms think about their value proposition, they usually include at least some of the following elements:

  • Trusted advisors
  • Long-term history
  • Good reputation
  • Technical expertise
  • Knowledgeable and experienced personnel
  • Utilize latest technology
  • Wide range of customers served
  • Committed to customer service

Note that none of the characteristics describe the experience the customer will have with the firm. ...

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