JM175: don’t blame value-based pricing

Marko printed it out.

Not a screenshot. Not a forwarded link. He walked in with the whole thing. A4, colour ink, red pen circling two lines like blood from a nosebleed.

“Finally,” he said, flattening it on the project table like an old roadmap. “Someone who gets it.”

The room was half-full. Delivery standup in ten. Whiteboard still showed yesterday’s scoping notes: effort bands, risk buffer, a red X through “hourly.” Coffee cups everywhere.

Eva glanced up from her screen. “What’s that?”

“Proof,” Marko said, grinning. “That I’ve been right all along.”

He tapped the headline: Value-Based Pricing is BS. Underlined twice. “It’s ego dressed up as strategy. This newsletter nails it.”

No one replied.

“We’ve been wasting time,” he went on. “All this value-framework-theatre. It’s impressive in slides. Useless in a real proposal.”

Anja didn’t look up. Same black Muji notebook. Same calm. She was writing something, not fast, not slow.

Eva raised an eyebrow. “You’re quoting newsletters now?”

Marko ignored the jab. “She gets it. Clients don’t care about potential. They care about comparisons. Price needs a frame, not a theory.”

He sipped his coffee, waited for applause. Got silence.

Then Anja flipped a page in her notebook.

“Yesterday’s call,” she said. “Remember the CFO?”

Marko gave a half-nod. Eva muted her notifications. The room shifted.

“They weren’t pushing back on delivery. Or scope. Just price. Said it was too high. Too vague.”

“Exactly,” Marko said. “Because we framed it as value.”

“No,” Anja said. “Because we hadn’t made the value legible.”

Eva leaned in. “They asked for benchmarks?”

“They asked for a rate card,” Anja said. “Said we needed to ‘make it real’ for procurement.”

Marko exhaled. “So what, we just held the line?”

Anja shook her head. “I asked them what’s the cost of delaying go-live by 60 days?”

She let it sit.

“They didn’t know,” she continued. “So we ran the numbers with them. Live. Losing Q1 meant ten lost early clients they’d already pitched. Around €400K in missed revenue. Keeping the legacy platform live? €140K more in infra and license bloat. But the real hit — no transformation bonus pool for the CTO and CFO. That was another €700K.”

Eva blinked. “€1.2 million in exposure.”

Marko hesitated. “So we became the cheaper option by pointing out their own pain?”

“Exactly,” Anja said. “We didn’t drop price. We changed perspective.”

She flipped her notebook shut.

“They still wanted movement. So we offered three structures:

A) Cut scope.

B) Phase delivery.

C) Keep full scope, but link payments to milestone impacts, not effort.”

“And they picked C,” Eva guessed.

“They picked C,” Anja confirmed. “It gave the CFO something to defend. Made him look structured, not weak.”

Marko frowned. “We’re lucky he played along. Most clients would just keep asking for lower.”

Anja shook her head. “They stop asking once they understand the cost of not signing.”

She paused, then added: “That’s the difference. Cost-based pricing assumes the client doesn’t care about delays. Value-based makes it visible.”

Eva tapped her screen. “Same thing happened with that UK e-commerce client. We came in lowest on hourly, still lost.”

Marko looked up. “That wasn’t pricing. That was politics.”

“No,” Eva said. “That was timing. The other vendor mapped their delivery to the client’s Q4 launch event. We just sent a number.”

“We gave them accuracy,” Anja said. “They chose alignment.”

Marko leaned back. “Alright. But how many deals can carry this kind of analysis? Feels like overkill unless there’s real budget.”

“You don’t do it for every deal,” Anja said. “You do it for the right deals. The ones where cost isn’t the ceiling, indecision is.”

She turned to Marko. “You care about clean delivery surfaces. This is how you get them. If we sell time, they’ll measure time. If we sell outcomes, they’ll measure outcomes.”

Eva added, “And if we frame the risk right, we avoid margin erosion later, because the tradeoffs are already baked into the structure.”

Marko was quiet now. The kind of quiet that happens when something familiar starts to feel fragile.

He reached for his coffee. Cold. He set it back down.

Anja stood. “Standup in two.”

Marko looked at her. “You really think value-based pricing is better than cost-based?”

She paused. “Cost-based pricing is easier. But it assumes the client knows what something should cost. In software services, nobody really does. Not even the vendors. There’s too much unpredictability.”

Marko didn’t respond.

Anja went on. “VBP isn’t magic. You still need cost anchors, to know your minimum. But from there, you price for what matters to them. Not what it costs you.”

Eva added, “It’s still margin control. Just on a different axis.”

Marko gave a slow nod. “And it only works if delivery can hold the line on outcomes.”

Anja nodded. “Exactly. That’s why we never frame VBP without delivery at the table.”

She picked up her notebook. “And when it’s done right? It protects us. Because the client isn’t buying hours. They’re buying a result they care about.”

Marko looked down at the newsletter printout again. The headline didn’t feel quite as sharp now.

He folded the paper once. Then again. Dropped it in the bin without a sound.

He finally got it.

Value-based pricing does work. Just not for people who skip the work.

PS.

I write this newsletter for fun. 

Fictional characters, imagined dialogues, but grounded in real conversations.

All based on what I see every day in my work on pricing for IT services:

> Building a pricing Agentic AI workflow for IT & software services companies with 1,000+ employees

> Ongoing fractional pricing & revenue strategy work with several tech companies

> Delivering pricing workshops and sprints

> Writing a book about the impact of AI on the business of selling and delivering IT services

> and pricing webinars