Consulting Economics

Tool

Summary

Commodity services can be provided at premium rates if they are associated with the implementation of an important vision (e.g., building a castle) and not just every-day services (e.g., laying bricks).

There are three ways to set a price:

  • Based on the cost of what is delivered plus a fair profit.
  • The price of the next best competitive offering.
  • The value delivered by the offering adjusted for uncertainty.

In general, set a price based on cost when it is mandated; e.g., when doing cost-plus work for the federal government. Set price based on competition when there are competitors. And price based on value whenever you can!

Intelligent Strategies. Successful Ventures.

X