About this Presentation
Justin Roff-Marsh presents a rapid transition from cost-plus pricing to a value-based pricing system designed around market value, throughput contribution, judgment, and continuous learning. His starting argument is that pricing is a root system of cost-based reasoning. Cost-plus pricing may help avoid obvious losses, but it can reinforce a conflict between administrative logic and operating reality and prevent an organization from reaching optimum profitability. Roff-Marsh contrasts two fundamentally different pricing assumptions. Cost-plus treats pricing as a deterministic process built from objective inputs such as material cost, direct labor, overhead allocation, margin, and markup to produce a single price. Value-based pricing begins from the market, uses subjective inputs and judgment, and treats price as a range of possible outcomes rather than a single precise answer. The proposed framework begins with a quote request and an estimate of market value. A reference Throughput Value is then calculated, commercial options are designed, and a cluster of three propositions can be offered with different prices and terms. Each proposition must meet or exceed an expected T/Cu hurdle rate for the relevant production period. The session uses a residential property example to show how a market reference can be adjusted with visible attributes before moving to the industrial commercial logic. The implementation is deliberately fast. During a five-day sprint, the organization first socializes the new approach and its implications, then uses a workshop to design the framework and test it against historical transactions, followed by rapid tuning on live cases. Roff-Marsh argues that a long transition creates competing pricing systems and prolongs old mental models. Finally, the framework is designed to learn. After opportunities close, teams conduct after-action reviews, update pricing assumptions, document changes, and roll back changes that do not improve the framework. This creates a pricing Process of Ongoing Improvement rather than another static formula.
What Will You Learn
To help you get the most value from this session, we’ve highlighted a few key points. These takeaways capture the main ideas and practical insights from the presentation, making it easier for you to review, reflect, and apply what you’ve learned.
Why cost-plus and value-based pricing rest on different assumptions: cost-plus is deterministic and cost-driven, while value-based pricing is judgment-based, market-oriented, and better represented as a range of possible outcomes.
How the value-based framework moves from estimated market value to reference Throughput Value and then to multiple commercial propositions rather than a single cost-derived price.
How T/Cu can be used as a hurdle-rate test so alternative prices and terms are evaluated against expected throughput contribution during the relevant production period.
How to make the transition quickly through a five-day sprint and then make the pricing system self-learning with after-action review, documented assumption changes, and rollback of changes that do not improve results.
Instructor(s)
Justin Roff-Marsh
For 20 years, Justin Roff-Marsh’s deep thinking and writing on Sales Process Engineering has blazed a trail for others to follow. Justin is the author of The Machine: A Radical Approach to the Design of the Sales Function. (Winner of Gold in the Sales category of the Axiom Business Book Awards.) And he’s the founder of Ballistix—a consultancy with operations in the USA and Australia, delivering engagements worldwide. Although Justin was a science nut as a child (and still is today), he commenced his career in sales. He sold insurance and then progressed to manage a team of 100 salespeople. He then co-founded a firm that sold financial education and quickly discovered that his product lacked the margins required to sustain a typical field-based sales force. He developed his approach to sales process engineering in response to this challenge. Justin’s approach to the sales process is as revolutionary as Deming’s was to manufacturing. He argues passionately that the application of scientific management principles to the sales process is the next great uncharted frontier for industry.