Ronald J. Baker 
Pricing on Purpose 
Creating and Capturing Value

–Reed Holden, founder, Holden Advisors Corp., www.holdenadvisors.com coauthor, The Strategy and Tactics of Pricing: A Guide to Profitable Decision Making, Third Edition
‘With Pricing on Purpose, Ron Baker had made an enormous contribution to the better understanding of pricing that will be accessible to anyone who wants to learn. People are intrigued by instances of what they see as idiosyncratic pricing. Sometimes it is idiosyncratic, but oft-times it is fiendishly clever and well researched. So is this book. There are examples that at first sight seem to have nothing to do with the subject at hand, but the learning points are all made and explained in any number of interesting and memorable ways. Pricing on Purpose is a welcome and valuable addition to the learning on pricing and I recommend it to professional pricers, marketers, and anyone interested in capturing the value their business creates.’
–Eric G. Mitchell, President, Professional Pricing Society, www.pricingsociety.com
‘Ron Baker is what I’d call a ‘thought giant.’ In his first two books he literally began a revolution in the accounting and legal professions. Thousands of professionals in public practice now lead far better, more rewarding lives thanks to him. Now he’s broadened his impact in a huge way. Read this book, implement the ideas and you’ll never look at your prices or your pricing policies in the same way again. You’ll be richer in many ways because of it.’
–Paul Dunn, founder and CEO, Results Net Australia, coauthor, The Firm of the Future: A Guide for Accountants, Lawyers, and Other Professional Services, www.resultsnetaustralia.com
‘As a reader of hundreds of business books, I am thrilled when I come across one that has something new to say. Pricing on Purpose does just that. Instead of presenting a set of feel-good items to check off a list, Ron Baker encourages us ‘to think with him, not like him.’ He methodically builds his argument leading us through the labyrinth of pricing theory and encourages us to look at pricing as the strategic tool that it is rather than taking the lazy cost-based tactical approach of most businesses. To paraphrase Karl Marx in terms of Baker’s book, ‘Cost-based pricing is the opium of business.”
–Ed Kless, Director, Partner Development and Recruitment, Sage Software
‘Baker has done it again! Building on the core principles that he advanced in Professional’s Guide to Value Pricing and The Firm of the Future, Ron Baker has again evolved thought leadership on the critical dynamics of value and pricing. Baker’s latest work, Pricing on Purpose: Creating and Capturing Value, provides real-world examples and practical strategies that provide a framework for pricing optimization. His clarity of purpose and passionate call to action resonates in today’s intellectual capital economy.’
–Thomas Finneran, Executive Vice President, American Association of Advertising Agencies
‘We love this book! With detailed research, thorough references, and recommendations for further reading, this could be considered a textbook. That it is so readable and engaging is a triumph. The chapter providing the epitaph for cost-plus pricing is worth many times the price of this book. ‘Got price-sensitive customers? Wonder why? Read and stop weeping. Who’s in charge of value in your company?’ Baker asks. If you can’t immediately answer, you’d better read this book. Bravo, Baker!’
–Paul O’Byrne and Paul Kennedy, partners, O’Byrne and Kennedy LLP, Chartered Accountants, United Kingdom, www.obk.co.uk
‘Ron Baker is nothing short of brilliant, and his enthusiasm for pricing is contagious. Pricing on Purpose will add more value to your firm than anything else you could do. As usual in Ron’s books, he presents cutting-edge ideas. There is no greater value to your company than to read Pricing on Purpose and implement its ideas.’
–Scott Abbott, entrepreneur, former regional business development, manager, BDO Dunwoody, LLP, Manitoba, Canada

Table of Content

Foreword xi

Preface xv

Acknowledgments xix

About the Author xxv

1 Why Is Movie Theater Popcorn So Expensive? 1

2 Why Are We in Business? 7

3 Mind Over Matter 15

4 The Old Business Equation 25

5 The New Business Equation 31

6 Ninety-Nine-Cent Pricing, Engagement Rings, and the Assumption of Rationality 41

7 The Invisible Hand: No One Person Knows How to Make a Pencil 49

8 ATale of Two Theories 63

9 Cost-Plus Pricing’s Epitaph 87

10 The Wrong Mistakes 103

11 Price-Led Costing Replaces Cost Accounting 121

12 What and How People Buy 129

13 The Value Proposition 143

14 The Consumer Surplus and Price Discrimination 175

15 Customer Segmentation Strategies 197

16 Price Discrimination in Practice 213

17 There Is No Such Thing as a Commodity 235

18 Baker’s Law: Bad Customers Drive Out Good Customers 249

19 Ethics, Fairness, and Pricing 269

20 Antitrust Law 283

21 Who Is in Charge of Value? 307

22 Pricing on Purpose: Getting Paid for the Value Your Company Creates 333

Bibliography 343

Suggested Reading 355

Index 367

About the author

Ronald J. Baker started his career in 1984 with KPMG’s
Private Business Advisory Services in San Francisco. Today, he is
the founder of Vera Sage Institute, a think tank dedicated to
educating businesspeople around the world.

As a frequent speaker, writer, and educator, his work takes him
around the world. He has been an instructor with the California CPA
Education Foundation since 1995 and has authored ten courses for
them: How to Build a Successful Practice with Total Quality
Service; The Shift From Hourly Billing to Value Pricing;
Value Pricing Graduate Seminar; You Are What You Charge For:
Success in Today’s Emerging Experience Economy (with Daniel
Morris); Alternatives to the Federal Income Tax; Trashing
the Timesheet: A Declaration of Independence; Everyday
Economics; The Firm of the Future; Everyday Ethics:
Doing Well by Doing Good; and The New Business Equation for
Industry Executives.

He is the author of the best-selling marketing book ever written
specifically for professional service firms,
Professional’s Guide to Value Pricing (seventh
edition), published by CCH, Incorporated. He also wrote Burying
the Billable Hour, Trashing the Timesheet, and You
Are Your Customer List, published by the Association of
Chartered Certified Accountants in the United Kingdom. His prior
book, The Firm of the Future: A Guide for Accountants, Lawyers,
and Other Professional Services, co-authored with Paul Dunn,
was published in April 2003 by John Wiley & Sons, Inc.

Ron has toured the world, spreading his value-pricing message to
over 70, 000 businesspeople. He has been appointed to the American
Institute of Certified Public Accountant’s Group of One
Hundred, a think tank of leaders to address the future of the
profession, named on Accounting Today’s 2001, 2002,
2003, 2004, and 2005 Top 100 Most Influential People in the
profession, and received the 2003 Award for Instructor Excellence
from the California CPA Education Foundation.

He graduated in 1984 from San Francisco State University with a
Bachelor of Science in accounting and a minor in economics. He is a
graduate of Disney University and Cato University. He is a member
of the Professional Pricing Society and presently resides in
Petaluma, California.