November 6, 2019

What’s the difference between cost, price, and value?

A classic question came up in TPS today that I haven’t talked about here on the list in quite a while.

Since there are a lot of new folks who might have missed it in the past, I want to quickly define the differences between the terms cost, price, and value.

The genius of value pricing is that it starts with defining the value, then price second, and finally the cost (i.e., your scope).

Why is this genius?

Because when you encounter high value engagements - “expensive problems” in my lingo - you can set prices that are potentially very high compared to your costs. This leads to very profitable engagements for you.