Sent by Jonathan Stark on April 22nd, 2020
Longtime reader Frank McClung sent in a great question regarding my mention of Ben from Knapsack who offers a “website in a day” productized service. Here’s the crux of Frank’s message (shared with permission):
The irony here appears to be that Knapsack has traded hourly pricing for daily pricing. And their productized service is still tied directly to time (in this case a day or so). For it to be truly value-based pricing, they would need to decouple from the time it takes to deliver their service. And to become truly productized, they also will need to decouple time from the equation to get a value-based price, otherwise they are just spending less time on their service.
As I see it, this passage contains two key assertions that I would like to clarify:
Correct! Knapsack chose a productized service model. By definition the price is cost-based, not value-based.
This is fine because the service is highly repeatable, which means that they can decrease their costs over time with optimization, which leads to increased profitability.
I only recommend value pricing for non-trivial custom projects. It’s usually not worth the effort for short engagements.
Not really. The promise is different.
If I hire someone for $3000 per day, I would expect to be able direct their actions for 8 hours. Their promise to me is that I get 8 hours of their time. There is no way for the seller in this situation to deliver a day in less than a day, therefore they can’t increase their profitability without increasing their rate.
If I pay Knapsack for their “website in a day” productized service, I don’t get to tell them what to do, and I don’t necessarily get 8 hours of their time. It might take them 8 hours or it might take them 4 hours. Either is fine with me, because they didn’t promise me 8 hours of their time. Their promise to me is that I’ll have a website that I am proud of by 5pm.
I don’t know this for sure, but I’d be willing to bet that if Knapsack didn’t deliver a website I was proud of by the end of the day, they’d either keep working on it or refund my money. The “in a day” part isn’t a time-based deliverable, it’s a guarantee.