The Value Of Your Value: How To Elevate Your Pricing And Move From Hourly Wages To Outcome-Based Wealth

When you charge for outcomes, people invest in your solutions and results—and these have nothing to do with how many "hours" you put in.

Nov 06, 2023

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Dear Friend, Subscriber, and Category Pirate,

Do you know how much you’re “worth”?

If this question makes you tense, it’s because value (especially your value) is a highly emotional topic.

The thing is, your value—and your customer’s, client's, or employer’s reaction to your value—says more about them than it says about you. Yet, people are scared to increase their prices or ask for a higher salary or more stock because they think it’s a personal reflection of their worth.

But it actually reflects your customers, clients, and employers.

Do they have the budget for what you want to charge or don't they?

If they don't have the budget, they're not going to be a good fit for you. If they do, working with them will be a helluva lot easier. And if they can create net-new budget for you, you’ve found someone who truly sees the value of what you do.

Want to listen to this mini-book instead? Head to the audiobook version, available to all paid subscribers.

Listen to the audiobook

In this mini-book, pricing is going to get personal.

You’re going to learn why and how to value (and price for) the outcomes you generate.

Not only is this relevant for negotiating your salary, bonuses, or commissions if you’re working a regular 9-5 job, but it’s also important if you’re a solopreneur, consultant, coach, writer, creator, or anyone whose pricing is determined by charging for an hourly rate or a deliverable. Because you might currently charge the equivalent of $100/hour or $1,000/hour for your time. But if you charge for outcomes, instead of hours, you can charge the equivalent of $10,000/hour or even $100,000/hour.

We know you (might) have doubts.

But you’re valuable beyond what you believe yourself to be. (We Pirates have helped each other price based on outcomes, and we'll help you do it too!)

First, let’s talk about value.

The Value of Your Value

Everything you value, you've been taught to value—and taught to value in a particular way.

When you go to the grocery store and hand the cashier a Benjamin, you walk out with groceries you believe to be “equal in value” to what you paid. That’s because everyone agrees that the green-colored pieces of cotton folded in your wallet have meaning and value. It’s what we’re taught to believe. And it works because we all agree. (That’s the only reason money works. It’s a made-up construct for value exchange with no intrinsic value.)

But value is dynamic.

It can, and does, change.

Pastor Evan Mawarire, a Zimbabwean pastor and democratic activist (and perhaps the most courageous mission-driven leader we know), described what it was like to grocery shop during hyperinflation in his country. He said you would stand in line to buy eggs and other basic groceries with enough money to pay for your food. But by the time you got to the checkout counter, you no longer had enough money for the food because inflation increased so rapidly.

It got so out of control, the Zimbabwe government had to print one-hundred-trillion-dollar bills.

In reality, nothing has intrinsic value.

But most people see value (and therefore, money) very differently.

They look at an iPhone and say, “Of course, this chunk of metal, glass, and microchips is $1,200 worth of value.” No, it's not. That price is the perceived value that we’ve been taught to “see” by the clever Category Queen of smartphones, Apple.

Can you really “see” the difference between these two phones?

If you’re a regular consumer (or a sea-faring pirate visiting shore), it’s impossible to understand why one is worth $1,199 of value and another is worth $899 of value. But you immediately “see” the $300 difference if you’re an Apple or Samsung Superconsumer. In fact, it would be painful to trade your metal chunk for the other metal chunk.

That pain is acute and powerful.

So powerful that it directly impacts the perceived value and, ultimately, the pricing.

Value, and therefore pricing, lives in a value hierarchy that lives in a value landscape.

Think about the SUV category. made up of many subcategories, like tires, wheels, breaks, seats, entertainment centers, etc. As a result, the values (price) of the subcategories must be meaningfully less. Tires cannot cost more than SUVs.

That’s a category value hierarchy.

The SUV also lives in a connected landscape of value.

understand these value hierarchies and landscapes

Today, people treat pricing the same way they treat markets—as if they are things that just happen.

The traditional approach to pricing is an inside-out strategy, which starts with the internal factors and costs of a business and sets prices based on those factors. The focus is on covering costs, reaching certain profit margins, and considering production expenses, overhead, profit levels, and so on. This approach is straightforward, but it has a massive limitation.

Inside-out pricing doesn’t always align with what customers/clients/employers are willing to pay or consider the value you (or your product/service) provide to customers.

The category design approach to pricing is outside-in.

Outside-in pricing starts with educating customers about a problem and/or opportunity in a compelling way that establishes a new hierarchy of (perceived) value in their heads. (Because we all have a hierarchy of value.) It factors in their preferences, market performance, and perceived value when setting prices, and the goal is to align pricing with customer expectations and market dynamics.

To break out to a new level of (perceived) value, design a new category.

Here’s one story we love.