Value Pricing

Price should be nothing more than a reflection of the value of a product as perceived by the customers. Price and perceived value should be in balance.

Value-based pricing therefore focuses on the following key question: What value can you extract from the market?

This involves quantifying the perceived value and increasing that value whenever is profitable, i.e., the price the customer is willing to pay for the increased value is higher than the cost of delivering it. You extract value by setting prices. This requires determining the price elasticity for various customer segments to maximize the overall profitability.

Our sophisticated, quantitative methods (i.e., conjoint analysis, discrete choice, disaggregate discrete choice) are used in combination with primary research through surveys to answer complex questions like:

• How much do quality, distribution, service, etc. contribute to the value delivered to the customer?
• How much is a performance improvement of x% worth to the customer in dollars and cents?
• How much will our market share increase if we improve our performance by x%?
• How are customers differentiated by the degree of importance they assign to quality, service, price, etc.?

Click here, to read more about Creating Targeted Value.

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