PricingBrew

Insights & Tips

Already a subscriber? Login

Become a subscriber and unlock an information arsenal focused on making your pricing efforts more effective.

Why Surgeons Don’t Bill by the Hour

If you have ever needed to shop for a surgeon, what kinds of questions did you ask? Maybe

  • How many times have you done this surgery before?
  • What’s your success rate?
  • What’s the typical prognosis for your patients after surgery?
  • What hospitals are you affiliated with?
  • Where did you go to medical school?

After you picked the surgeon you might have asked how long the surgery would take, but you probably weren’t using speed as a criteria for finding the person you wanted to cut open your body. And you certainly wouldn’t have said, “Can you get it done in 30 minutes? I spoke with another guy and he said it would take him 45 minutes.”

Why not?

Plenty of other professionals — mechanics, plumbers, electricians, accountants, lawyers — all bill by the hour, and we don’t hesitate to ask them to provide an hourly estimate. But doctors seem different somehow. We value their expertise much more than we value their time.

Plus, paying a surgeon by the hour wouldn’t make logical sense, because the best surgeons probably can do the surgery faster than those who less experienced. Specialists who are the best in their field don’t want to get paid less for doing the same surgery just because they can perform them quickly — nor should they!

Along the same lines, imagine if people bought cars by the pound or kilo. It might make sense because bigger cars often do cost more than smaller cars. But should a brand new Ferrari cost less than the beat-up old pickup truck sitting up on blocks in my neighbor’s back yard? Of course, not. The Ferrari’s value lies in much more than its weight.

Unfortunately, too many B2B companies fall into commodity pricing traps like these. If you price your services by the hour or your goods by weight, you have basically admitted that your product is exactly the same as all its competitors on the market. And your customers will buy based on price alone — which is never a good situation.

Unless it’s absolutely necessary, you should avoid pricing by the hour. Or the pound. Or the gigabyte. Or based on supply costs. Or any other commodity-style criteria.

Instead, focus on the value you are providing to your customer. If your company is very experienced, it might well take you less time to perform services than another firm. Or you might be able to manufacture a higher quality product much more cheaply than the competition. But those facts shouldn’t impact your pricing. Just like the highly skilled surgeon, you should charge more for providing a superior service.

We have some resources that delve into this idea more deeply. Check out

Hourly pricing is a common mistake. Focusing on value instead can help you maximize your revenues.

Get Immediate Access To Everything In The PricingBrew Journal

Related Resources

  • Optimizing Pricing Operations

    Over the last few years, most teams have changed their day-to-day operations quite a bit to deal with all of the challenges. So how do we make sense of this patchwork to make our operations more efficient and effective?

    View This Webinar
  • Getting the Most Out of Price Segmentation

    The process of building or improving a price segmentation model can seem like a daunting task. In this on-demand training seminar, we discuss best practices and straightforward techniques for improving the quality and accuracy of your price segmentation model.

    View This Webinar
  • The New Benchmarks for B2B Pricing Excellence

    With a lever as powerful as pricing, it’s important to evaluate where you have room for improvement. This report helps readers to benchmark their pricing capabilities through a series of self-assessment questions in 10 vital areas.

    View This Research
  • Essential Pricing Functions

    While there's only one pricing title on the business card, there are actually many different "jobs within the job." And it isn't easy to do the right jobs, at the right times, and in the right ways.

    View This Webinar