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Pricing on Purpose: Creating and Capturing Value 1st Edition

4.1 out of 5 stars 23 customer reviews
ISBN-13: 978-0471729808
ISBN-10: 0471729809
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Editorial Reviews

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


Product Details

  • Hardcover: 400 pages
  • Publisher: Wiley; 1 edition (February 3, 2006)
  • Language: English
  • ISBN-10: 0471729809
  • ISBN-13: 978-0471729808
  • Product Dimensions: 6.4 x 1.3 x 9.1 inches
  • Shipping Weight: 1.4 pounds (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (23 customer reviews)
  • Amazon Best Sellers Rank: #1,040,267 in Books (See Top 100 in Books)

More About the Author

Ronald J. Baker started his career in 1984 with KPMG's Private Business Advisory Services in San Francisco. Today, he is the founder of VeraSage Institute, a think tank dedicated to educating professionals around the world, and to burying the billable hour and timesheets in professional knowledge firms.

As a frequent speaker, writer, and educator, his work takes him around the world. He has been an instructor with the California CPA Education Foundation since 1995 and has authored fifteen courses for them.

He is the author of six books, including: Professional's Guide to Value Pricing; The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services, co-authored with Paul Dunn; Pricing on Purpose: Creating and Capturing Value; Measure What Matters to Customers: Using Key Predictive Indicators; and Mind Over Matter: Why Intellectual Capital is the Chief Source of Wealth; and, Implementing Value Pricing: A Radical Business Model for Professional Firms.

Ron has toured the world, spreading his value-pricing message to over 100,000 professionals. He has been appointed to the American Institute of Certified Public Accountant's Group of One Hundred, a think tank of leaders to address the future of the profession, named on Accounting Today's 2001, 2002, 2003, 2004, 2005, 2006, and 2007 Top 100 Most Influential People in the profession, and received the 2003 Award for Instructor Excellence from the California CPA Education Foundation.

He graduated in 1984, from San Francisco State University, with a Bachelor of Science in accounting and a minor in economics. He is a graduate of Disney University and Cato University, and is a member of the Professional Pricing Society. He presently resides in Petaluma, California.

To contact Ron Baker:

VeraSage Institute
E-mail: Ron@verasage.com
Website/Blog: www.verasage.com
Twitter @ronaldbaker
Facebook: http://www.facebook.com/pages/Implementing-Value-Pricing/160643393979925

Customer Reviews

Top Customer Reviews

Format: Hardcover
Pricing on Purpose by Ron Baker is, quite simply, one of the best books on pricing on the market. It revolves mainly around the subjective theory of value as opposed to the theory of cost-plus pricing. Without encroaching on Baker's territory by going into too much detail (a task I fear I would fail horribly at anyway), the subjective theory of value states that price determines costs, and that costs do not determine price. The fact that this simple statement flies in the face of many classical economic theories and in the face of many companies' pricing strategies is well understood by Baker at the onset. As such, almost the first half of the book is devoted to laying the foundation for both value theories historically as well as on a practical level. The summation of this course of discovery, one which Baker himself had to learn the hard way while working as a CPA, is that cost-plus pricing does not optimize profits. The subjective theory of value, on the other hand, enables companies to "price on purpose," or put the customer at the front end of the value chain. The subjective value chain, as I call it, looks like this:

Customers > Value > Price > Costs > Product

This value chain (first introduced in Nagle and Holden's The Strategy and Tactics of Pricing) flips the traditional chain completely around, and for a very good reason. As value varies depending on customers, so does price vary depending on value. "Price-led costing" is the result, as the costs incurred to create the product depend entirely on the created value and the customers' willingness to pay for this value. Only after all of this is considered is the product developed.
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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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Format: Hardcover
For professional service firms, no issue is of greater importance than pricing. But the issue is of even more importance to the individuals and businesses that hire lawyers, accountants or consultants. Recently, most major law firms announced that starting salaries will be increased to $140,000 per year, with commesurate increases of 10,000 for each associate class. These increases, amounting to several millions of dollars per firm, come off the bottom line, decreasing partner profits. Most of these firms are responding by increasing the hourly rates charged by their associates. As a result, the cost of the legal services received by clients is increasing, but the value received is not. At the same time, most businesses are facing growing pressure to lower the costs of legal services and to operate more efficiently. These rate increases thus create a significant conundrum. In light of these growing challenges facing clients and service professionals, Ron Baker's latest book, Pricing on Purpose is timely if nothing more. But befitting his status as the leading thinker on pricing for professional services, Baker's book offers significantly more than simply exquisite timing.

The book begins with a simple question-- "Why is popcorn so expensive in a movie theatre?"-and proceeds with a fairly high level discussion of pricing theory. Following the theory, Mr. Baker focuses on the real world buying and pricing decisions faced by professional service firms and clients on a daily basis. He analyzes in great detail how a client willing to put aside its prejudices really can shift from hiring professionals whose economic interests run counter to their clients' interests to hiring professionals and paying a fair value from the client's perspective.
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