Stratinis' Blog | Price Optimization and Revenue Management Insights and Tips

How Effective Is Value-Based Pricing?

Written by Stratinis | 26-Sep-2014 15:54:00

Marketing Donut explain how value-based pricing is the most highly recommend pricing technique by consultants and academics. The basic concept involves setting a price to capture the majority of what your customers are willing to pay. You are focusing on setting a price to capture the value, that a potential customer receives. The following can help determine how to:

  • Identify your customer’s second best option. If your customer won’t buy your product or service, then what would they choose?
  • Determine the price of the second best option.
  • List all of the ways that your offering is better than the second best option. Estimate how much you think these differences are worth to your customers?
  • List all of the ways that the second best offering is better than yours. Be very honest here. How much do you think these are worth to your customers?
  • To calculate the best price — take the price of the second best option (step 2) plus the value of your advantages (step 3) minus the value of the second best option’s advantages (step 4).

Key attributes that differentiate a product include:

  • Brand
  • Quality
  • Physical Attributes
  • Service
  • Ease of Purchase
  • Style

Read more at http://www.marketingdonut.co.uk/marketing/marketing-strategy/pricing/why-value-based-pricing-works-best

See how Stratinis can endeavour to optimize and manage your prices through our pricing software