Baker argues that value is created outside the firm in the hearts and minds of customers and is largely independent of the time or effort taken to create it. The focus for pricing decisions therefore has to be the customer's perception of value - what would customers willingly pay for this product or service? Getting it too high will lead customers to walk away. Getting it too low will damage customers' perceptions of value.

Baker rightly dismisses those who bemoan that their services have become a commodity. They have merely failed to create value for their customers. That value depends not only on the function of a product or service but on the whole design of the customer experience or transformation (ie demonstrated outcome).

Everything - at every point of contact with customers - must act to create a perception of value. Baker lists the 5 Cs of value:
1.Comprehend value to customers
2.Create value for customers
3.Communicate the value you create
4.Convince customers they must pay for value
5.Capture value with strategic pricing based on value.

Different customers will have different perspectives on value and this justifies differential pricing. Baker examines various strategies for ethical differential pricing such as skim pricing where a relatively high price is set initially (to capture early adopters willing to pay more) before lowering prices, perhaps with a slightly different product, for the mass market -think of hardback books, the newest mobile phones and iPods.

For me the most important question in the book is "Who is in charge of value in your firm? If your answer to that question is "everyone" then it might as well be no-one. Two organisations - both accountancy firms - have taken a lead in appointing a Chief Value Officer.

Baker argues his case well with a thorough analysis and sound theoretical underpinning. Notwithstanding this, it is very readable (I read it during a five-hour flight) with extensive quotes and illuminating examples.

I for one am looking forward to Ron's next book in his series on intellectual capitalism which will deal with key performance indicators for value and pricing competence.


Baker does it again!!!!   February 6, 2006
Yet another corker from Ron Baker.
Just what we expected: more of the common sense approach to one of the most important aspects of any business:PRICING. Ron writes in an easy to understand style with plenty of examples and leads us through the theory so that we implement his ideas. I particularly liked chapter 17 on there is no such thing as a commodity.

Keep the books coming Ron. I look forward to the next one on KPI's. I now aim to perfect the art of pricing !!!!