Overview

Information and knowledge behave in very different ways to most products or simple services. For example, if you transfer knowledge to a client or even many clients you still have that knowledge, and in fact probably more than you started with. Very importantly, there is often little relationship between the cost of inputs and the value of knowledge outputs. And much attention has been paid to how knowledge is often subject to increasing returns rather than diminishing returns: it can increase in value the more it is shared. ^[1]

All of these characteristics suggest that the pricing of knowledge and knowledge-based services should be very different from that of more traditional products and services. Yet still many of the same approaches to pricing are used. One important reason is simply the immense difficulty of valuing and pricing knowledge. As we have seen, the value of knowledge depends on its context and the client.

The organic, fluid nature of knowledge means there is no easy way to price it, and no neat, glib answer as to how professional service firms should charge for their services. Certainly, however, professional service firms need to reexamine the basis on which they charge, and at least experiment with different approaches to pricing. This chapter aims to cover many of the most common approaches to pricing knowledge, as well as some more novel methodologies. As with much of this book, the intention is to provide practitioners across the professional industries with lessons from their counterparts in related...