When Value-Based Pricing Doesn't Work & What to Do About It
Value-based pricing is often hailed as the gold standard for pricing services. Charge what your service is worth, not just what it costs you.
The logic is solid: customers pay based on the impact of your work rather than the time you put in.
However, value-based pricing isn’t foolproof.
Sometimes, it can work against you, leading to lost sales, confused customers, and a misalignment between your work and client expectations. Here’s when it might not be the right fit and other options to consider.
5 Situations Where Value-based pricing doesn’t work
1. When Your Market Lacks Pricing Maturity
In industries where customers are used to fixed pricing or hourly rates, shifting them to a value-based model can be an uphill battle.
If your audience has a strong cost-plus mentality—where they expect to see a breakdown of hours, materials, and effort—it may not be easy to justify charging for the broader impact of your work.
For example, many small business owners who hire their first service provider—like a bookkeeper, copywriter, or virtual assistant—may struggle to see the big-picture ROI and are more comfortable with an hourly or fixed-fee arrangement.
Educating them on value pricing can take time, and if your industry isn’t ready for it, you may lose deals to competitors with clearer, more familiar pricing structures.
2. When the Value is Hard to Measure
Value-based pricing works best when the work's results are clear, measurable, and directly tied to financial impact.
If you’re a business consultant who helps companies increase their revenue by 50%, it’s easy to justify premium pricing. But if your work is more qualitative—think brand strategy, leadership coaching, or even high-end design—the ROI may be less tangible, making it harder for clients to justify a high price.
Even if the value is real, if your clients can’t easily connect your work to a bottom-line impact, they may oppose value-based pricing or prefer a more traditional pricing structure.
3. When Clients Don’t Trust the Process (Yet)
Value-based pricing relies on a strong foundation of trust between you and your clients. They have to believe that the impact of your work will be worth the premium price tag.
If you’re newer in your field, have a less established brand, or are targeting clients who are skeptical of investing in professional services, they may not feel confident paying based on potential results.
This is especially true for industries with a history of over-promising and under-delivering (hello, online business coaching!). If your audience has been burned before, they’ll be wary of paying based on projected value rather than upfront deliverables.
4. When Your Pricing Is Off-Market
Simply put, you might be overpricing yourself.
I know, it's not the sexy advice you hoped for, but hear me out. I meet many freelancers who purport to price based on their value but are priced off-market.
Then, they asked me why they didn’t have clients, but they weren’t willing to budge on their price.
We should all absolutely know and charge our worth. That said, if you compare yourself to your top 5 competitors (even if you think your offering is better than theirs) and you’re more than 20% more expensive, I’d think hard about why.
5. When the Scope is Unpredictable
Value-based pricing assumes a clear understanding of what’s being delivered and its impact. However, in industries where the scope of work is highly variable—like complex software development, legal services, or crisis consulting—charging based on value can become tricky.
If a project expands beyond its initial scope or new challenges arise that weren’t accounted for in the original pricing, you may find yourself doing significantly more work than expected without a straightforward way to adjust pricing.
In these cases, hourly or milestone-based pricing might make more sense to account for the shifting scope.
So, what are alternative pricing models to value-based pricing?
If value-based pricing isn’t working in your business, consider a hybrid approach:
Tiered Pricing: Offer different service levels at different price points, allowing clients to choose what fits their budget.
Retainers or Fixed Fees: Provide predictable pricing while still structuring packages that align with the value you deliver.
Performance-Based Pricing: You can tie part of your fee to actual results, sharing in the upside without requiring clients to take the full risk upfront.
Hourly or Project-Based Pricing: In industries where value is more complex to quantify, these models may provide the transparency clients need.
Value-based pricing can be a powerful tool, but it’s not always the best choice. Understanding when it works and doesn’t work can help you build a pricing model that aligns with your market, clients, and business goals.
Need help with your pricing strategy?
If you're looking for expert advice on pricing your business services effectively, we’re here to help.
