It is the features that matter and they should govern the prices that you attach to your products. Marketers must not be foolish enough to count brand value as a factor for assigning a dollar value to their products. Value-based pricing isn’t based on brand value per se. Two Common Myths About Consumer Value-based Pricing Strategy Myth: Brand value should dictate pricing when using a value-based pricing strategyĬustomers are not going to flock to buy your products just because you have a higher brand value. Luxury brands like Prada, Hermes, and Louis Vuitton and premium brands like Apple are examples of businesses that often use value-based pricing to their advantage. Although other gemstones are available at lower prices, the diamond is still the go-to and the socially acceptable norm because of how people perceive the diamond’s irreplaceable value. This is understandably the most challenging step.Ī value-based pricing example is the diamond industry where people are willing to spend as much as they can to profess their love with a diamond engagement ring. It involves pinning a dollar value to that differentiated worth and then pricing your product or service accordingly. This can include one or more features that are unique in your product, packaging, or product quality. It is imperative to understand that the key component of this pricing strategy is the differentiated worth of the product or service when compared to what your competitors offer. In case of multiple consumer segments, each must have its own value-based pricing strategy. Value-based pricing must be applied to a consumer segment. Value-based pricing is linked to the pricing of your competitors, and especially the pricing of the closest competitor that customers turn to if your product is not available. It is possible to increase your profitability with this method when you deliver a product or service which has a high perceived value. The higher the value of the product or service, the higher the price the customers are willing to pay. It is based on strategizing your pricing in line with how much value customers attach to that particular product or service. Value-based pricing strategy is also commonly known as perceived value pricing strategy or value-added pricing strategy. Here is all that you need to know about value-based pricing strategy: What is Value-based Pricing Strategy? But unfortunately, it is also one of the most misunderstood among them all because business owners don’t fully comprehend its power or overestimate what it can do. Value-based pricing strategy is among the top five pricing methodologies used by marketers. Value-based pricing strategy or customer value-based pricing is a concept that has been around for quite some time and it is high time businesses get a good grasp of it. Pricing strategies are a core part of every business because they direct how the prices of your products and services will be set. Should Your Business Use Value-based Pricing?.Cost-based Pricing Strategy vs Value-based Pricing Strategy.Step 3: Identify Distinct Features and Assign Value.Step 1: Find your Target Consumer Segment.Steps to Follow in a Value-based Pricing Strategy. Myth: Value-based Pricing Will Always Lead to Success and Higher Revenue for Every Business.Myth: Brand Value Should Dictate Pricing when using a Value-based Pricing Strategy.Two Common Myths About Consumer Value-based Pricing Strategy.What is a Value-based Pricing Strategy?.
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