Everything You Need to Know About Value-Based Pricing
Value-based pricing is a pricing model defined by a simple fact of capitalist life: A product costs as much as people are willing to pay for it. Leveraging the strategy is a matter of understanding where that phenomenon leaves your offering and leaning into how consumers perceive it.
Here we’ll explore the concept of the value-based pricing model in greater detail, cover some key elements to consider when structuring a value-based pricing strategy, and review some ways to help set value-based prices.
- What is Value-Based Pricing?
- Value-Based Pricing Strategy
- Value-Based Pricing Examples
- Three Ways to Set Your Value-Based Price
- The Pros of Value-Based Pricing
- The Cons of Value-Based Pricing
- Is Value-Based Pricing Right for Your Business?
- The market influences how much a consumer will be willing to pay for a product.
- The benefit that the product provides to the customer influences the value of that product.
- Competitors’ pricing can influence how valuable consumers perceive a product to be.
- Recognizing inelastic demand, where the need for the product is so high that a lower price would have little-to-no impact on unit sales.
- Highly competitive and price-sensitive markets, since the level of competition usually settles at the price where consumers are willing to pay, and charging more could turn away interested buyers looking for a good deal.
- Promoting prestige, where markups will be higher-than-usual to denote the exclusivity and grandeur of the product.
- Selling companions and add-ons to other products that enhance their functionality, like a new charger for your cell phone or laptop if your old one breaks.