[manuelmoreale]

> When I started programming I costed projects like this. Now I price things based on their value to the customer.

What would the world look like if everyone was using this mindset? Water is VERY valuable to customers for example. So is food. Tech people have a very distorted ways to look at the value of their work and I say this as someone who works in tech.

[baumschubser]

but everyone is using this mindset. on average in an economy, prices are more or less the maximum what a customer might pay. If it is more, it is not bought obviously, and if it is less, it sure will be more sooner or later, because why not. What is preventing water (and e.g. health outside of the US) and schools etc. from getting super expensive is usually that they are not produced and sold as a commodity on a free market with competitors, but provided in a regulated, often state-owned way where market mechanisms do not (fully) apply. Where it does, things get ugly. Google "water war bolivia".

edit, to comment the original statement: Price must be >= cost of production, obviously. But it must also be acceptable to the customer. So you go as high as you can and if that is still not enough to cover your costs, then you stop your business and do something else. If it is very much higher than you need, sooner or later a competitor will notice the extraordinary profits in your sector and do what you do at a lower price.

[manuelmoreale]

Saying that "prices are more or less the maximum what a customer might pay" is different than saying "I price things based on their value to the customer."

Because in tech that might be doable but again, the "value to customer" of something like food is obviously infinitely high because without it you ain't gonna go much far.

And there's a reason why generally speaking countries have laws to prevent price gouging around a certain types of goods. Becuase without them, I am 100% sure that some dickheads would try to screw people over because that is what capitalism is producing.

But also, this idea that you should be paid based on the value I get out of your work is bizarre to me. if you are self employed or you run a business, you decide how much you want to charge for a product or a service.

Why does it matter how much I get out of it?

[bruce511]

>> Why does it matter how much I get out of it?

Because the more you get out of it, the more you are willing to pay for it.

Conversely, if it's worth more to you than you are paying for it, why do you care how much the markup is? If it's not worth it to you, don't buy it.

[manuelmoreale]

> Because the more you get out of it, the more you are willing to pay for it.

In "normal" contexts, sure. Would you be happy if doctors were using this aproach and just asked you insane amount of money simply because you obviously want and need their service?

The thing I'm trying to say is that this approach doesn't apply equally across the work landscape.

Hypotetical: let's say you're a developer and you code me an ecommerce site. It takes you a month to do it and you charge me 10k. Should you be paid more if I make 1M using that site? What if I make 100M?

Does the value of your work changes based on how much value I get out of it?

[bruce511]

The problem with the "how much it cost to make" approach is that means that there is literally no room for error. You're not building in any cushion - no shock absorber. One bad idea, one dud product etc and the company goes under.

On the other hand there are _lots_ of examples of value based pricing outside the tech world. some examples;

a) Any "luxury good". Think Ferrari, Birkenbag, designer clothes etc. b) Any supply-constrained service - think rounds of golf at St Andrews. c) Popcorn at the movies d) Movie tickets (they are not dependent on the cost, or earnings, of a movie) e) Office rent. It costs the same to build a building, so why do rents vary so much depending on location?

and so on. value-based-pricing is not a tech thing - it exists everywhere.

[manuelmoreale]

I'm not arguing for a "how much it cost to make" approach. I'm arguing agains the "Now I price things based on their value to the customer" approach.

Because the notion of "value to customer" means nothing. What is the value of a piece of software? What is the value of a website? What is the value of branding? The problem I have with all your examples is that those are all tangible things while software work is, for the most part, a service. Coding a website for a client doesn't cost me anything in a traditional, material sense.

I can't quantify how much it cost to make a site. But I do have to assign a monetary value to my work as a developer. And figuring out that value based on how much value my client gets out of my work is a conceptually flawed aproach IMO.