What is Value Based Pricing?

Value Based Pricing is simply setting of a product or service's price based on the benefits it provides to customers.

In reality, what may well happen is that you alienate your customers and there's the awful potential to lose them completely over time. 

An "across the board" price increase is never going to be popular with your customers but if you can explain how much value you provide (perceived or estimated)  and just how much that value is worth, then there's a much better chance that your customers will accept the price and remain loyal. 

Where it is successfully used, value-based pricing will improve your profitability due to higher prices without impacting greatly on sales volumes – and hopefully without antagonising your customers.

It can be used in many different industries to price everything from TVs and pharmaceutical drugs, to boilers and airplanes. The best value-based pricing strategies find ways to make price a non-issue or to make the product pay for itself. 

 

Value Based Pricing is the Future

Value based pricing is the way forward because it allows you to charge more for your products or services without alienating your current customers or potential customers.

Yes, knowing your costs is essential but you need to avoid an over-simplified price structure based purely on your costs.  You need to ensure that you are offering value to your customers and in a way that they can clearly understand.

Never be afraid to state the value you are giving (either verbally or in writing) because this is more or less the only way you are going to get customers to accept a higher price.

You need to ensure that your customers have a clear understanding of what value you are offering – and if you don't tell them how will they know the true value of what you are trying to sell?

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