Value based pricing, or Value optimized pricing is a
business strategyStrategic or institutional management is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives...
. It sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price.
The goal of value-based pricing is to align price with value delivered. Price for any individual customer can be customized to reflect the specific value delivered.
Discussion
Ask a question about 'Value-based pricing' Start a new discussion about 'Value-based pricing' Answer questions from other users |
Value based pricing, or Value optimized pricing is a
business strategyStrategic or institutional management is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives...
. It sets selling prices on the perceived value to the customer, rather than on the actual cost of the product, the market price, competitors prices, or the historical price.
The goal of value-based pricing is to align price with value delivered. Price for any individual customer can be customized to reflect the specific value delivered. Examples could include metrics such as number of users and the value per users, number of annual transactions and the value per transaction, size of revenues and the impact on revenues, cost savings, or other measurements. Value based pricing is intended to make companies become more competitive and more profitable than using simpler pricing methods. It can also be used in product development and product management to configure products to maximize value for specific customers.
Value-based pricing is
dependent upon an understanding of how customers measure value, through careful evaluation of customer operations. Survey methods are sometines used to determine the value, and therefore the willingness to pay, a customer attributes to a product or a service. Frameworks for value-based pricing include Economic Value Estimation are Relative Attribute Positioning,
Van Westendorp Price Sensitively MeterThe Price Sensitivity Meter is a market technique for determining consumer price preferences. It was introduced in 1976 by Dutch economist Peter van Westendorp. The technique has been used by a wide variety of researchers in the market research industry. The PSM approach was a staple technique for...
,
Conjoint AnalysisConjoint analysis, also called multi-attribute compositional models or stated preference analysis, is a statistical technique that originated in mathematical psychology. Today it is used in many of the social sciences and applied sciences including marketing, product management, and operations...
and Navetti Ratio To Complete.
Another value pricing method uses Customer Value Research, which is Bernstein & Macias' method for gaining the customer's perception of value through the use of both qualitative and quantitative research methods.
See also
- Economic Value Estimation
- New Product Pricing
- Pricing
Pricing is a fundamental aspect of financial modelling, and is one of the four Ps of the marketing mix. The other three aspects are product, promotion, and place...
- Value (marketing)
Value of a product within the context of marketing means the relationship between the consumer's expectations of product quality to the actual amount paid for it...