IS THE FAIR PRICE SET BY BUSINESSES OR CUSTOMERS?

The fair price is definitively a flexible notion. For an entrepreneur, it is extremely important to know how to accurately position their offer / product, on their market, at the right price. Fixing a price requires sometimes very complicated formulae. But for me, I believe that the yield management methodology used by airline companies, is the most relevant.

Bertrand Bathelot is an Associate Professor of marketing, specialist of digital marketing since almost 20 years. He believes that yield management is ” a marketing technic of flexible pricing used in services characterized by a strong presence of fixed costs. And by a certain inertia of proposed capacities (public transportation, hotel business). The yield management consists in maximizing the generated sales. [Hence] playing on variables price and the coefficient of occupation by means of a policy of differentiated pricing”.

CLOSER TO HOME; HOW DO WE (EASILY) DETERMINE A FAIR PRICE?

Closer to home, for a self-employed or a leader of very small enterprise, to determine a price is often extraordinarily complex. Because it is necessary to consider specific working costs. But also, one has to consider practices of the business sector etc. … It seems easier though, when it comes to products or services of general economic interest.

Still, how to determine fees for a purely intellectual service? Intellectual service is inherently immaterial. And, what we, consultants, do sell, is our experience, our sensibility, our education, our time…

Fortunately, certain people have no difficulty estimating their own value. For others though, it is more difficult. Despite their skills and relevance in their domain, these people, when they become entrepreneurs, have difficulties valuing their services. They are confronted with something called “Impostor syndrome”.

A very interesting article published in lemonde.fr and written by Angela Sirigu, describes the syndrome like this: ” The individual who is affected convinces himself (herself) that he/she is not competent for the function he/she occupies or which he/she dreams of. And [that person] fears to be unmasked sooner or later as a fraud. [This goes] to the point that that person can give up any new opportunity which could make its career progress “. Read more about it HERE (French).

First there is the simple perception that the provider of intellectual services (or artistic) has of his(her) person and value. Then it is necessary to consider what the market is ready to invest for the “suggestive” services.

WHO SHOULD VALUE WHAT?

To build its price list, the consultant / solo-entrepreneur has to operate a subtle alchemy between factual data (fixed costs, administrative costs, taxes etc…/ actual need expressed by the market etc.) and suggestive data (valuation of the knowledge of the consultant / need not expressed by the market etc…).

Eventually, and based on my experience, no matter the price we fix, and whether or not it is overestimated. What is going to make the price right, is the actual amount the customer is willing to pay.

So, could it be that the fair price is finally the value that the consumer is ready to invest? I’m afraid the answer is YES … What was all the fuss about then?

We make very complicated plans and sharp algorithms to fix and propose a price to the public. But really, at the end of the day, I concluded that, services and products providers, can only estimate a value. The final decision is not ours. The fair price is the consumer’s decision.

And you, what do you think?