12/21/2023 0 Comments Value pricing strategy![]() Value-based pricing has become an increasingly popular pricing approach thanks to its ability to maximize revenue and profit. The Benefits of a Value-Based Pricing Strategy If however, you had just spent two days in the desert and are about to keel over from dehydration, and he assesses your need before putting the price up to $10… well, that’s called price gouging and as a business, you’ll want to steer clear of that. You are actually willing to spend $5 on a bottle of water at this moment. $5 for a bottle of water? “Well, yes, because you really, really, really want it.” He’s right. We’ve all been standing in line for a ride at an amusement park, baking in the sun, gasping for a drop of water…when a guy turns up selling bottles for $5. There are many different drivers of value. Your customer gives you something of value (their money) in order to get something of value in return (relief from the heat). Value is what is derived from those features (faster cooling, stored out of the way, easy to operate).Ī purchase of your air conditioner is an exchange of value. Its three speeds, slim-line appearance, and remote control are all great features, but features merely address a customer need. This is key: it’s not the appliance itself that is worth more to them, but the value the appliance brings. Your Arizona customers’ context increases their desire for your product, and they are therefore willing to pay more for the value it will bring them. Your air conditioner will be clogging inventory at an Alaskan warehouse in January but will be flying off the shelves at an Arizona supermarket in July. The second thing value-based pricing does is enable you to take customer context into account. So, you can show a high-end price to impress your pro, and a lower price so as to win over the dabbler. So, the first thing value-based pricing does is enable you to price based on the customer-how much value they see in your offering. Pricing for the dabbler means sacrificing potential profit from the pro, and pricing for the pro means losing the dabbler entirely. The dabbler might spend $100, but $320 just isn’t worth the value he’ll get from it. A customer who plays tennis every second month won’t be half as inclined to spend $320 on your fancy new tennis racket as the pro (who’ll want one in every color). Of course, the amount a customer is willing to pay will be different for different types of customers. Value-based pricing is a customer-focused strategy that involves setting prices based not on your costs or competition, but on your customer’s perceived value of your offering-how much it is worth to them. We’ll also look at which types of company should be considering a value-based pricing strategy and which should not. In this article, we’ll take a deep dive into what value-based pricing really is, the benefits it brings, the drawbacks it presents, and how it’s being used by companies in various industries to maximize profits and revenue. Will it be worth the effort?Īt Pricefx, we’ve spent the past decade helping companies successfully make the jump and we’ve seen how their value-based strategy has delivered incredible ROI, so we thought we’d share some of our expertise in value-based pricing with you. ![]() For many, the jump from cost-plus to value-based is just too wide. But actually, adopting it is a different story. ![]() ![]() The power of a value-based pricing strategy to boost profit and revenue has caught the attention of pretty much every organization. ![]()
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