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Pricing on Purpose: Creating and Capturing Value Hardcover – 13 Jan 2006


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Pricing on Purpose: Creating and Capturing Value + Implementing Value Pricing: A Radical Business Model for Professional Firms (Wiley Professional Advisory Services) + Value-Based Fees: How to Charge? And Get? What You're Worth (Ultimate Consultant (Pfeiffer))
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Product details

  • Hardcover: 402 pages
  • Publisher: John Wiley & Sons; 1 edition (13 Jan. 2006)
  • Language: English
  • ISBN-10: 0471729809
  • ISBN-13: 978-0471729808
  • Product Dimensions: 16.3 x 3.3 x 23.1 cm
  • Average Customer Review: 4.8 out of 5 stars  See all reviews (9 customer reviews)
  • Amazon Bestsellers Rank: 156,646 in Books (See Top 100 in Books)
  • See Complete Table of Contents

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Product Description

From the Inside Flap

The book presents the theory of value long established in economics and details how any business can use various pricing strategies to create, communicate, and capture the value of their products and services. It takes a new approach of focusing on the external value as perceived by the customer and advocates matching price to value. Written in everyday language so it′s valuable to beginning executives as well as professional pricers and marketers, it covers:

  • What and how people buy
  • The fallacy of commodity thinking
  • The five Cs of value
  • The market share myth
  • The difference between cost–plus pricing and value pricing
  • A comparison of the Subjective Theory of Value and the Labor Theory of Value
  • Customer segmentation strategies

Complete with examples from a multitude of industries and successful entrepreneurs and peppered with quotes from business experts as well as economists, the book is not a dry treatise on an ethereal economic theory. It′s lively and down–to–earth, using examples such as the high cost of popcorn in movie theaters, 99? pricing, and the way love–struck couples purchase engagement rings. It gets down–to–business, providing proven strategies and tactics CEOs, CFOs, marketing managers, and professional pricers can implement as a part of a value–based pricing architecture. If the purpose of your business is to add value to customers in order to earn profits, Pricing on Purpose can be incredibly valuable to your business!

From the Back Cover

Reed Holden, founder, Holden Advisors Corp., www.holdenadvisors.com coauthor, The Strategy and Tactics of Pricing: A Guide to Profitable Decision Making, Third Edition

"With Pricing on Purpose, Ron Baker had made an enormous contribution to the better understanding of pricing that will be accessible to anyone who wants to learn. People are intrigued by instances of what they see as idiosyncratic pricing. Sometimes it is idiosyncratic, but oft–times it is fiendishly clever and well researched. So is this book. There are examples that at first sight seem to have nothing to do with the subject at hand, but the learning points are all made and explained in any number of interesting and memorable ways. Pricing on Purpose is a welcome and valuable addition to the learning on pricing and I recommend it to professional pricers, marketers, and anyone interested in capturing the value their business creates."
Eric G. Mitchell, President, Professional Pricing Society, www.pricingsociety.com

"Ron Baker is what I′d call a ′thought giant.′ In his first two books he literally began a revolution in the accounting and legal professions. Thousands of professionals in public practice now lead far better, more rewarding lives thanks to him. Now he′s broadened his impact in a huge way. Read this book, implement the ideas and you′ll never look at your prices or your pricing policies in the same way again. You′ll be richer in many ways because of it."
Paul Dunn, founder and CEO, ResultsNet Australia, coauthor, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services, www.resultsnetaustralia.com

"As a reader of hundreds of business books, I am thrilled when I come across one that has something new to say. Pricing on Purpose does just that. Instead of presenting a set of feel–good items to check off a list, Ron Baker encourages us ′to think with him, not like him.′ He methodically builds his argument leading us through the labyrinth of pricing theory and encourages us to look at pricing as the strategic tool that it is rather than taking the lazy cost–based tactical approach of most businesses. To paraphrase Karl Marx in terms of Baker′s book, ′Cost–based pricing is the opium of business.′"
Ed Kless, Director, Partner Development and Recruitment, Sage Software

"Baker has done it again! Building on the core principles that he advanced in Professional′s Guide to Value Pricing and The Firm of the Future, Ron Baker has again evolved thought leadership on the critical dynamics of value and pricing. Baker′s latest work, Pricing on Purpose: Creating and Capturing Value, provides real–world examples and practical strategies that provide a framework for pricing optimization. His clarity of purpose and passionate call to action resonates in today′s intellectual capital economy."
Thomas Finneran, Executive Vice President, American Association of Advertising Agencies

"We love this book! With detailed research, thorough references, and recommendations for further reading, this could be considered a textbook. That it is so readable and engaging is a triumph. The chapter providing the epitaph for cost–plus pricing is worth many times the price of this book. ′Got price–sensitive customers? Wonder why? Read and stop weeping. Who′s in charge of value in your company?′ Baker asks. If you can′t immediately answer, you′d better read this book. Bravo, Baker!"
Paul O′Byrne and Paul Kennedy, partners, O′Byrne and Kennedy LLP, Chartered Accountants, United Kingdom, www.obk.co.uk

"Ron Baker is nothing short of brilliant, and his enthusiasm for pricing is contagious. Pricing on Purpose will add more value to your firm than anything else you could do. As usual in Ron′s books, he presents cutting–edge ideas. There is no greater value to your company than to read Pricing on Purpose and implement its ideas."
Scott Abbott, entrepreneur, former regional business development, manager, BDO Dunwoody, LLP, Manitoba, Canada


Inside This Book (Learn More)
First Sentence
Why don't we observe movie popcorn price wars, similar to what other industries engage in from time to time? Read the first page
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Most Helpful Customer Reviews

8 of 8 people found the following review helpful By Phil Gott on 9 April 2006
Format: Hardcover
Ron Baker's latest book confirms him as a thought leader in the field of value pricing. The topic is a crucial one for all business organisations. This is not just a specialist book about pricing and billing though. The content of the book is better summed up by its subtitle: "Creating and Capturing Value". That also sums up what business should be about, which is why this is such an important book.
Baker argues that value is created outside the firm in the hearts and minds of customers and is largely independent of the time or effort taken to create it. The focus for pricing decisions therefore has to be the customer's perception of value - what would customers willingly pay for this product or service? Getting it too high will lead customers to walk away. Getting it too low will damage customers' perceptions of value.
Baker rightly dismisses those who bemoan that their services have become a commodity. They have merely failed to create value for their customers. That value depends not only on the function of a product or service but on the whole design of the customer experience or transformation (ie demonstrated outcome).
Everything - at every point of contact with customers - must act to create a perception of value. Baker lists the 5 Cs of value:
1. Comprehend value to customers
2. Create value for customers
3. Communicate the value you create
4. Convince customers they must pay for value
5. Capture value with strategic pricing based on value.
Different customers will have different perspectives on value and this justifies differential pricing.
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7 of 7 people found the following review helpful By Christopher Jones on 6 Mar. 2007
Format: Hardcover
"If you charge for the demonstrated outcome the customer achieves, then and only then are you in the transformation business"

In the first book in his Intellectual Capitalism series, Ron Baker returns to the topic that has seen him named in the World's 100 Most Influential Accountants: value pricing.

Unlike his previous works, "Pricing on Purpose" is not devoted only to professional service firms (or professional knowledge firms in Baker's terminology) but all business organisations. However, the theme is familiar, if now broader and deeper: the subjective theory of value, that value subjectively judged by customers determines prices.

Baker invites us to "think with him" as he takes us through the history of economic theory on pricing and value, and then through numerous practical examples of price psychology and strategy. Along the way, Baker demonstrates that there is no such thing as a commodity, that cost-plus pricing is dead, the importance of customer selection and that striving to offer a superior value proposition is key. While the point feels intuitively right, Baker repeatedly proves that successful businesses price their products and services based on the external value perceived by their customers rather than the internal costs incurred in their delivery. Activity-based costing is a "wrong mistake".

While focused here more on the why than the how, Baker then wraps up with a discussion on the support structures needed to implement value-pricing, in particular pricing teams and Chief Value Officers.

What distinguishes this book from a typical business tome is that the thinking is grounded firmly in academic, economic - indeed, pricing - theory rather than the latest management fad.
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4 of 4 people found the following review helpful By Rolf Dobelli TOP 1000 REVIEWER on 31 July 2008
Format: Hardcover
Ronald J. Baker makes a sound economic case that the traditional method of generating prices by calculating costs and figuring in an acceptable profit is outdated and unsuitable for today's knowledge-based business world. Price differentiation and value-based costing have been around for a while, but Baker's explanation is useful and nicely written. He explains how different customers will value your product their own way, and how to use that differentiation to make money. In 22 concise chapters, he shows you how to understand your customers better and how to create value that they will buy. By capturing a share of that value you earn profits. Baker has a knack for explaining economic concepts in plain English rather than abstruse textbook jargon - and that's valuable, right there. Get it, read it, use it and make more money. getAbstract recommends it in particular to marketing and product management professionals (or anyone who is interested in the subject of pricing).
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2 of 2 people found the following review helpful By Mr. Ross Maynard VINE VOICE on 23 Jun. 2009
Format: Hardcover Verified Purchase
It is not often you can recommend a business book for its literary quality, but Ron Baker's "Pricing on Purpose" is exceedingly well written, and stuffed with quotations from a wealth of sources - from Thomas Paine to Karl Marx, via Adam Smith, Peter Drucker and Pope John Paul II. In superbly argued and widely referenced form, Mr Baker trashes the concept of cost-plus pricing - "The customer simply does not care how long it took General Motors to build his or her car" - showing that cost-plus pricing is never profit maximising: leading, as it does, to under-pricing in strong markets (where resource utilisation is high); and over-pricing in weak markets where utilisation is lower; - hardly a profit maximising strategy !

In fact the profit maximising price is the one which most closely relates to customer value. Customer value is, of course, subjective and individual to each buyer - based on the buyer's needs, wants and preferences at that particular time. This means that, when a customer changes their needs, wants or preferences, the value to them of goods and services changes - regardless of the cost of production.

Thus there are no "easy" solutions to the question of pricing and Mr Baker offers none. Instead he suggests close communication with the top 20% of customers to identify what drives "value" for them. Sadly however, he gives us little guidance on how to analyse and quantify that value, or how to establish a profitable pricing policy. Perhaps Mr Baker feels this is the domain of other books (he gives an extensive reading list) but I think an overview chapter on these topics would be most valuable.

You could also, perhaps, criticise Mr Baker for his slightly long-winded style, with frequent diversions from the core subject.
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