Pricing on Purpose: Creating and Capturing Value (Hardcover)

~ (Author) "Why don't we observe movie popcorn price wars, similar to what other industries engage in from time to time?..." (more)
Key Phrases: chief value officer, intellectual capital economy, physical fallacy, United States, Peter Drucker, Adam Smith (more...)

Editorial Reviews

Product Description

—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

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!

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Product Details

• Hardcover: 400 pages
• Publisher: Wiley (February 3, 2006)
• Language: English
• ISBN-10: 0471729809
• ISBN-13: 978-0471729808
• Product Dimensions: 9.1 x 6.1 x 1 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 3.9 out of 5 stars  See all reviews (15 customer reviews)
• Amazon.com Sales Rank: #121,267 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

9 of 9 people found the following review helpful:

5.0 out of 5 stars you are what you charge., July 8, 2006

By	Dan Bergevin - See all my reviews

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.

This only scratches the surface of Pricing on Purpose and no review can fully capture the intellectual value of reading this or any of Baker's books. My suggestion is to read this book back-to-back with The Strategy and Tactics of Pricing by Nagle and Holden (the new fourth edition is by Nagle and Hogan). Ron Baker's magnum opus on pricing, Professional's Guide to Value Pricing (currently in its sixth edition), is the next on my pricing reading list and is supposed to fill in a gap in the field of pricing literature by providing a detailed analysis of how to implement value pricing for services. For anyone interested in value pricing or the theoretical grounding behind it, Pricing on Purpose would make an excellent starting point for framing the proper mindset to understanding more profitable applications of the art of pricing.

3 of 3 people found the following review helpful:

5.0 out of 5 stars Ron Baker shows us how to price on purpose and with purpose., July 17, 2006

By	Garry Beavis (Perth, Western Australia) - See all my reviews (REAL NAME)

This is essential reading for any professional service provider.
As the title suggests, understanding the why and how of 'creating and capturing value' will change the way you think about your services and how you deliver those services to your customers. Many professionals are trapped in the traditional ways of doing things and many try to be all things to all people. Ron Baker explains how professionals need to change and how to 'deliver' value, not just to customers, but to the right customers and at the right price.

3 of 3 people found the following review helpful:

5.0 out of 5 stars An excellent overview of a timely topic, July 6, 2006

By	Robert G. Cross (Atlanta, GA United States) - See all my reviews (REAL NAME)

Ron Baker has written an intriguing book which explores the theory and practice of pricing...from classical economic thinking to the psychology of price. The book is well researched, well considered and well written.

But most of all, it is readable. Lessons in creating and capturing value are richly illustrated by thought-provoking and often humorous stories. Why is movie theater popcorn so expensive? How do Starbucks and Evian get away with such price premiums? Why do men's shirts cost less to dry clean than women's?

Forget your preconceptions that pricing is a dry and arcane topic. Prepare to be simultaneously entertained and educated by Pricing on Purpose.