Impact Pricing Podcast

#CLASSIC The Art of Value with Kirk Bowman

Kirk Bowman is the founder and Visionary of Value and the Art of Value, a pricing consultancy in Dallas, TX. His podcast, the Art of Value Show, is one of the most shows for knowledge professionals. He has spoken at numeration conferences on pricing including QuickBooks Connect and Scaling New Heights. In 2011, he was appointed a Practicing Fellow at the VeraSage Institute, the think tank founded by Ron Baker. His software company, MightyData, was featured in the book Implementing Value Pricing.

In this episode, Kirk talks about value pricing, how he was introduced to it and later switched to this method in estimating and billing customers.  Be inspired as he shares how this decision increased his revenue by over 50% in the first year and 70% in the second.  Learn this and more in his journey on value pricing.

Why you have to check out today’s podcast:

  • Find out how Kirk learned about the concept of value pricing
  • Identify the two categories in measuring results
  • Find out details about Kirk’s pricing consultancy company and his podcast

 

“The next time the customer asks for a lower price, turn around and ask them what value they are willing to do without in order to get that price.”

Kirk Bowman

 

Topics Covered:

01:36 – How Kirk discovered value pricing

03:40 – The concept of value pricing and how it aligns the interests of the professional with his customer

07:13 – Two categories in measuring value: results or outcomes, and how the two differ

12:11 – Sharing the profile of his pricing consultancy company – Art of Value and how it is helping professionals with their business models

14:32 – His podcast – Art of Value and the reason he loves doing it

19:37 – His pricing advice that has a significant impact

 

Key Takeaways: 

“The customer’s interests are the most important thing. When you align with that, you’re lining things up for success.” – Kirk Bowman

“It’s so important to put alignment upfront as one of the things that you’re striving for and keep your eye on at all times because it is in our human nature to focus on our own self-interest and so the focus on theirs, it requires intentionality. It requires strong character.” – Kirk Bowman

“Value and pricing are subjective, and by the way, that’s okay.” – Kirk Bowman

 

Connect with Kirk Bowman:

Connect with Mark Stiving:   

 

Full Interview Transcript

(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)

Mark Stiving

What you’re about to hear is an impact pricing podcast classic. You may have missed it. Hope you enjoy it.

Mark Stiving

Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike. If you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.

Mark Stiving

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the intricate relationships between them. I’m Mark Stiving, host of the podcast and today for episode one, we have a very special guest, Kirk Bowman. There are three things you’d want to know about Kirk before we start. First, he’s the founder of a pricing consultancy firm called The Art of Value. Second, he’s a podcaster himself. His show called The Art of Value is also about pricing, as you might guess. And third, Kirk has a phenomenal title: visionary of value. And if you’ve ever heard his podcast, you know that’s absolutely true. And one more thing, Kirk was one of my first guests on a previous podcast I would occasionally host called Pragmatic Live. And he so graciously accepted the spot of guest on the very first episode of this new podcast. Welcome, Kirk.

Kirk Bowman

Mark, thanks for having me. It’s an honor to be the first guest on your new show. Congratulations.

Mark Stiving

Oh, thank you. I appreciate it. And I’m excited. It’s going to be fun.

Kirk Bowman

It is. Like we were saying in the show prep, we always had an opinion, especially when it comes to pricing.

Mark Stiving

So, how did you get into pricing? Could you help me out with that one?

Kirk Bowman

Sure, I’d be happy to. I’ve been in technology now for 25 years and it was primarily in custom software development. So, just like a football player in the NFL needs to go to a tailor to get a custom suit because nothing fits, we did the same thing for businesses in the realm of software. We’re in that business for 15 years on an hourly billing model. Basically, we had an hourly rate. We would do estimates which were always wrong, and we would send invoices after work was done. And a lot of times we would have conversations with a customer after the fact about whether what we had spent our time doing was actually valuable.

After 15 years, and I laugh because it took that long, I was on a panel at a technical conference about estimating and billing practices. And I took the position that hourly is the only way to do it because you don’t know what the final product is going to be. So, it must be fair, right? Wrong. There was another consultant on the panel who introduced me to the idea of value pricing, and he said one thing that really resonated with me, he said, “If you bill by the hour, there’s an artificial limit on your income”. That haunted me and it drove me to do 90 days of research and then make a public commitment on another podcast to convert my business to value pricing within a year. We did it in 13 months. We saw revenue go up over 50% the first year and over 70% the second year. So that was my introduction to pricing.

Mark Stiving

Wow. First, we have to give kudos. Who was the other host? I’m guessing that I know, but go ahead.

Kirk Bowman

The other consultant that I mentioned is named Jonathan Stark. Jonathan and I were both in the same FileMaker technology space and Jonathan had the same epiphany I did. He just had it a little bit earlier, and so I give him credit for introducing me to it because it’s changed my direction ever since.

Mark Stiving

Wow. And I actually didn’t expect you to say the most important part of that was the fact that it was an artificial limit on your income. Absolutely true, by the way. But I would think that the most important part is that our goals as suppliers are not aligned with the goals of our customers.

Kirk Bowman

Oh, I completely agree with that. The way I phrase it is, “It’s a conflict of interest between you, the professional, and your customer because it’s in the customer’s best interest for it to take a few hours as possible to get a lower price. It’s in your best interest for it to take as many hours as possible. Higher revenue.” That’s a conflict of interest you can’t explain away. I don’t care how ethical you are.

And so, that’s the biggest issue I have. But you’re right. I was driven to value price initially because somebody said I could make more money. What I come to realize is it’s actually the most important reason because it aligns the interests of the professional with the customer. The customer’s interests are the most important thing. And when you align with that, you’re aligning things up for success.

Mark Stiving

Nice. Hey, let me push back on that just a little bit, because one of the things I often think about is as a company and then you’ve got a customer, we are aligned almost always. We want to create more value; they want to have more value. We want to create better products; they want better products. Almost always until you get to the price. And we, as a supplier, want to charge a higher price; they want to pay a lower price. Which is just like the conversation we just had where they want you to spend fewer hours, you want to spend more hours. So, we’re still not aligned perfectly, but it feels better because we took out the hours-level of indirection.

Kirk Bowman

I would say 100% alignment is never going to happen because you cannot be 100% altruistic no matter how good your intentions are. That’s one of the reasons why I think it’s so important to put alignment upfront as one of the things that you’re striving for and keep your eye on it at all times, because it is in our human nature to focus on our own self-interest. And so, the focus on theirs, it requires intentionality, it requires strong character and so forth. Even when we’re trying, we still have to remind ourselves they are most important because our instincts go toward. “I’m most important.”

Mark Stiving

And by focusing on their interest, what we’re really saying is, “How do they get value out of this project that we’re doing right now? How can we create more value for them, or at least make sure they get what they expect?”

Kirk Bowman

Exactly. In other words, what’s the outcome they’re seeking? We’re not talking about inputs, which is what ours are. We’re not talking about outputs, which is the “deliverable”, that may be in the scope of work. We’re talking about the outcome. Why would they even want to pay you thousands, tens of thousands, hundreds of thousands of dollars or something? They are only willing to do that if they’re expecting a greater return. And usually, that return is a minimum of a 3x and it can go up to 10x or higher. Obviously, the higher that X is, the better opportunity is for both of you. But that is what the customer seeking. And so many times, we focus on inputs if we’re doing an hourly or outputs, if we’re focused on deliverables and both those are dead wrong.

Mark Stiving

And it feels so hard, though, to measure results. Can you give us an example of how you would do that?

Kirk Bowman

Results fall into two categories: tangible and intangible. Tangible means we can measure it. We can quantify it. Intangible means we can’t measure it. It’s more of a feeling. So, the best we can do is ask somebody, for example, to rate it on a scale of 1 to 10. But yet even there, if the person is being honest, which we’re going to assume that they are, we can at least get an interpretation of the feeling, even though it is subjective. And so much of this whole thing, value and pricing is subjective. And by the way, that’s okay. It should be subjective and that’s a whole another question and conversation. But I just want to throw that out there, that that’s the way it’s supposed to be.

But when you look at something, for example, that’s quantifiable, we’re looking for, “How are we going to increase sales volume or revenue volume or profit?” or “How are we going to possibly reduce errors or inventory turnover?” or things like that. And by the way, it’s not me, the professional guessing at what we should improve. It’s asking questions and letting the customer communicate to me what is necessary. So, that’s fairly straightforward, at least in my mind, when it’s quantifiable because you’re looking for the ROI.

On the other side, the intangible, it’s harder because it’s squishy. But I actually think that the intangible is more valuable. And so, I dig for that. I ask questions. Sometimes one of the best questions you can ask is something along the lines of, “If money were no object, what would success look like? Just unpack it for me”. And whatever the customer says, probe further. By the way, whenever you ask these questions, you’re never going to get the full answer upfront. You got to dig deeper. You got to become a student of great questions.

Mark Stiving

Okay, I’m struggling with the following: First off, I love the answer that you just gave, especially for the quantitative side. And the reason I love working to B2B is because you can quantify value so much easier. But let’s say that you come to me and say, “Mark, I want to do this project for you. What’s your goal?” And I say, “I want to be happy.” How do you deal with that?

Kirk Bowman

I would say, “What does happy look like? What does Happy mean to you?” I’m not turned off or offended or challenged necessarily, because they use what may seem like something that’s so hard to wrap your hands around. Happy. It’s so subjective. I’m just going to ask questions so that they can describe that subjectivity because we can go deep enough to get some type of way to measure that. Some type of way to feel for that. And ultimately, if they’re excited about it, and it really is going to make a difference, it’s going to make me excited about it.

On the contrary, if the customer cannot “convince” me or “sell” me on what happens to them, if after a 30-minute conversation it’s still nebulous, I’m probably not going to engage. Because how am I supposed to hit a target that they can’t even describe?

Mark Stiving

And I like the fact that you said “We dig deeper for – I’m going to say the measurable – the quantitative parts”. Because to me, it has to be quantitative. I have to understand it

Kirk Bowman

I agree. And I would argue – maybe argue is not the right word – but I would put forth the idea that even the intangible can be quantified. You’re just quantifying it in like a scale of 1 to 10. So, for example, let’s say a customer comes to you and says, “Man, my employee morale stinks. What can you do to help me?” I might start out say, “Well, on a scale of 1 to 10, where do you think employee morale is?” “I think it’s a three.” And then you go further. “Why do you think it’s a three” and all of that that I would put down that three.

And then as part of the same conversation, I would come back and say, “Okay – and again, I love this phrase – if money was no object”, because it helps open up the dreaming. And I think that’s part of what we have to help customers do in this conversation; It’s to dream, because that unlocks the opportunity and it removes the lid that they may have put on it. If money were no object, where would you like to see employee morale get to? “Man, if it could get to an eight, that would be awesome.” “Why would that be awesome? What would that mean for the company? What would that allow you to do if your employees are at an eight on a scale of ten, how do you think that’s going to change? How do you think that’s going to affect?” And then just fill in the blank. “What is it they’re interested in?” Growth, profit, turnover, less errors, selling the company – whatever it is, attach that to it.

Mark Stiving

Absolutely love that. So, Kirk, can you tell us a little bit about the consulting company that you run? What types of things do you do? What types of clients do you have?

Kirk Bowman

Certainly. The Art of Value, as you mentioned up front, is a pricing consultancy. I work with professionals typically who are charging by the hour. Those types of professionals a lot of times fall into these professions: accountants, lawyers, software developers, etc. What I help them do is I help them change their business model from hourly billing to value pricing.

Value pricing to me means we’re first going to figure out what is the outcome the customer is seeking. So, eloquently asked, we’re going to quantify that, and then I want to capture a fair portion of that value that I’m helping create as a price. So, I’m not basing my price on inputs or outputs. I’m basing my price on the outcome the customer is seeking.

That’s what I help professionals do. And I would underscore, it’s a business model change. This is not simply figuring out how to stick another number on your proposal. This changes everything. It’s a way of thinking. It’s a mindset shift. So, if you are really going to nail it, I would say that I help professionals adopt a pricing mindset.

Mark Stiving

Nice. And it really does pervade everything. So, I guess a really important question: How much do you charge per hour?

Kirk Bowman

I don’t have an hourly rate.

Mark Stiving

That was a softball for you there, Kirk.

Kirk Bowman

That’s all right. I get it all the time. And by the way, if a customer asked a professional that question, my recommendation is, give a very similar answer for customers. It says, “What’s your hourly rate?”. Your response is, “I don’t have one”. And then you just shut up because the next person to talk should be the customer. Get used to the awkward silence and let them squirm in their chair until they say probably one or two things. “Why not?” or “How do you charge?” Either of those questions opens up a great opportunity for you to begin to explain why you’re different, why you have your business model, what the value of that business model is to the customer. Just get used to saying “I don’t have one”, and shut up.

Mark Stiving

Nice. Can you tell us a little bit about your podcast, The Art of Value? Why do you do it?

Kirk Bowman

I do it because it’s the best way to learn. I get a phenomenal opportunity to bring somebody on the show and I get to ask them the questions I would like answers to. So, for example, I get somebody like Rabbi Daniel Lapin, who arguably is one of the most successful people who talks about business and personal finance. I get him on the show and I get to ask him the questions I want to ask. Now, obviously, they’re around a theme. So, in his case, I picked one of his books, but it’s essentially an hour of free consulting to me because I get to learn.

What I’ve found is the questions I ask a lot of other people have, too. And that’s, I think, why the show resonates. But the goal of the show is I simply want to ask other people about this business model of value pricing. And so, I interview accountants, attorneys, software developers, authors, speakers. You are a guest on the show. I think it was like episode 50 or 51. That’s the purpose of the show.

Mark Stiving

Yeah, I was I had the privilege of being episode 50.

Kirk Bowman

You did. In fact, Rabbi Lapin was 100.

Mark Stiving

It makes me feel even more important now.

Kirk Bowman

There you go. Essentially, you’re the warm up act for Rabbi Daniel Lapin.

Mark Stiving

What other things I find so true is that this is a great opportunity for me to learn, and when I’m asking the questions that I’m really curious about, when I throw you the hard questions, what I think are hard questions, the audience, the listeners, they’re thinking the exact same thing. They’re sitting here learning along with me.

Kirk Bowman

It really is a mutual learning opportunity and it seems scary at first. I remember how nervous I was during the first 20 episodes. And I’ve realized it’s just a conversation. It just happened to be a conversation that we know in advance we’re recording. There probably ought to be that announcement, right? You know, “this conversation is being recorded and may be used to improve quality” or whatever they always say when you’re talking to your bank or whoever.

But it really is just a conversation. And that’s what I tell my guests before I have them on the show is I say, “Look, I prepare some questions there along these themes, but it’s a conversation and I’m going to be happy to go off script, especially if it’s in a direction that is valuable to me and the audience.”

Mark Stiving

So if money were no object, where would you like to see The Art of Value go? How do you like that question, by the way?

Kirk Bowman

I love that question. I love it when somebody takes one of my favorite questions and puts it back to me. In fact, I have a funny story. I won’t get into it now, but sometime I have to share it with you about where I did that with one of my guests.

But I would love to be in a position where I am working with partners, principals, owners of firms that are 100 or more people, helping them implement this business model. Because at that size of a firm, I can help make substantial impact not only on the principals, partners and owners, but on their teams and on their customers.

So, if money were no object, that’s what I’d be doing. And I’d be doing it not because of the money I’m making, but I just love it. The aha’s that I get from people who have adopted this business model, it is just amazing. We literally help people make more money working with fewer customers and working less hours. And that sounds like an oxymoron, but it is completely possible. Hundreds and thousands of people have done it. And I love to add to that.

Mark Stiving

I have a very good friend of mine who’s a lawyer. She used to work for a big law firm and she would always stress about the number of hours she built and what she worked on hard enough for long enough. Finally, she left and started her own company, and I try to talk to her about the difference between hourly versus billing for the project, or quoting for the project. And she just won’t listen. And I feel horrible watching her stress about the number of hours she builds.

Kirk Bowman

Here’s the irony. And I did a show on this. Episode six of The Art of Value, I interview a gentleman by the name of John Lax, who built on some of the early work that Ron Baker did. But he went further and did the research into where did the billable hour come from. The irony is it came from lawyers, but yet in the middle of the last century, we’re talking 1940s and 50s, lawyers were insulted if you ask them to bill by the hour. And yet you get up to the seventies and eighties, and all of a sudden, it’s become a symbol of honor, of pride, who has the highest billable hourly rate. And gosh, that is so prevalent now. And it’s absurd. It’s asinine. And if you go back and look at the history, you’ll understand, essentially that comes out of the economics of the Industrial Revolution. It makes no sense.

Mark Stiving

I agree. Well, we have to start wrapping this up, but let’s ask one more question for you. What’s one piece of pricing advice that you think would make a really big impact?

Kirk Bowman

The next time the customer asks for a lower price, turn around and ask them what value they’re willing to do without in order to get that price. Never respond to a question about a lower price without also figuring out what value you’re going to take away. Once you set a price, stick to it. You need to have a pricing backbone that is made of stainless steel, and the only way you come down in price is you also reduce the value. And I would add, if you offer three options, it makes that a lot easier.

Mark Stiving

Yeah, I agree. To our listeners, I hope you enjoyed that as much as I did. Episode one in the can. As we’re getting this podcast launched, your feedback is crucial to making it valuable to you. Would you please send feedback to mark@impactpricing.com? Also, feel free to send in any questions and we’ll try to answer them on a future episode. And finally, please join us next week for a new episode of Impact Pricing.

Mark Stiving

Thanks again to Jennings Executive Search for sponsoring our podcast. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people contact Jennings Executive Search.

Mark Stiving

Don’t forget to attend our workshop. “How to Fearlessly Raise Prices Now” go to impactpricing.com/rpn.

 

Tags: Accelerate Your Subscription Business, ask a pricing expert, pricing metrics, pricing strategy

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