Competitors' prices can influence the value that consumers perceive a product to have
Posted: Sun Dec 15, 2024 9:25 am
Artwork, cars, amusement parks, and even social media influencers use value-based pricing to sell their products and services. These 3 industries take into account some standard truths about value-based pricing:
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.
After taking these universal truths into account, companies apply the gambling data japan value-based pricing strategy according to their objectives or the state of their industry. It is used in different scenarios:
Recognize inelastic demand , where the need for the product is so high that a lower price would have little or no impact on unit sales.
Highly competitive and price-sensitive markets , as the level of competition is usually set at the price that consumers are willing to pay, so charging more could drive away interested buyers looking for a good deal.
Promote prestige , where margins will be higher than usual to denote the exclusivity and greatness of the product.
Sell add-ons to other products that improve their functionality, such as a new charger for your cell phone or laptop if the old one breaks.
For lower-priced products, value-based pricing is similar to competition-based pricing, while for higher-priced products, the model has much in common with prestige-related pricing.
Because value-based pricing thrives in the gray area of sales, one important factor consumers need to consider is negotiation.
Customers and sales representatives need to discuss the benefits and value of a product so that the consumer will pay a price that reflects the value they have placed on the product, while at the same time, the seller will make a reasonable profit.
Featured Resource: Value-Based Pricing Calculator
calculator for value based pricing strategy
►Value-based pricing strategy
Value-based pricing thrives in the gray area of sales. At the same time, there are some important factors that any seller should keep in mind when using this model. Let’s take a look at three of the most important ones.
Shortage
The value-based pricing model works best when applied to unique, higher-value products. Marketed products exist in a "sea of the same," where alternatives are often too fundamentally similar to lend themselves to different perceptions of value.
Differentiation
This point is essentially an extension of the previous one: if you want to take advantage of a value-based pricing strategy, you have to be able to justify it. This usually starts with demonstrating that there is a noticeable difference between your product and the competition.
Perceived value has to have some basis. If you're selling batteries and you offer a product that has the fifth longest shelf life - compared to other options available on the market - you can't expect to sell it at an industry-leading premium.
Potential customers tend to pay value-based pricing only for particularly valuable products; if you want to take advantage of this type of strategy, you need to be able to produce, identify, articulate and project legitimate value when it comes to your offering.
Segmentation
Market segmentation is an important element to consider when putting together an effective value-based marketing strategy. The model is generally not applied indiscriminately. Not everyone is willing to pay value-based pricing, so it is critical to pinpoint who will be receptive to this strategy and determine how best to attract them.
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.
After taking these universal truths into account, companies apply the gambling data japan value-based pricing strategy according to their objectives or the state of their industry. It is used in different scenarios:
Recognize inelastic demand , where the need for the product is so high that a lower price would have little or no impact on unit sales.
Highly competitive and price-sensitive markets , as the level of competition is usually set at the price that consumers are willing to pay, so charging more could drive away interested buyers looking for a good deal.
Promote prestige , where margins will be higher than usual to denote the exclusivity and greatness of the product.
Sell add-ons to other products that improve their functionality, such as a new charger for your cell phone or laptop if the old one breaks.
For lower-priced products, value-based pricing is similar to competition-based pricing, while for higher-priced products, the model has much in common with prestige-related pricing.
Because value-based pricing thrives in the gray area of sales, one important factor consumers need to consider is negotiation.
Customers and sales representatives need to discuss the benefits and value of a product so that the consumer will pay a price that reflects the value they have placed on the product, while at the same time, the seller will make a reasonable profit.
Featured Resource: Value-Based Pricing Calculator
calculator for value based pricing strategy
►Value-based pricing strategy
Value-based pricing thrives in the gray area of sales. At the same time, there are some important factors that any seller should keep in mind when using this model. Let’s take a look at three of the most important ones.
Shortage
The value-based pricing model works best when applied to unique, higher-value products. Marketed products exist in a "sea of the same," where alternatives are often too fundamentally similar to lend themselves to different perceptions of value.
Differentiation
This point is essentially an extension of the previous one: if you want to take advantage of a value-based pricing strategy, you have to be able to justify it. This usually starts with demonstrating that there is a noticeable difference between your product and the competition.
Perceived value has to have some basis. If you're selling batteries and you offer a product that has the fifth longest shelf life - compared to other options available on the market - you can't expect to sell it at an industry-leading premium.
Potential customers tend to pay value-based pricing only for particularly valuable products; if you want to take advantage of this type of strategy, you need to be able to produce, identify, articulate and project legitimate value when it comes to your offering.
Segmentation
Market segmentation is an important element to consider when putting together an effective value-based marketing strategy. The model is generally not applied indiscriminately. Not everyone is willing to pay value-based pricing, so it is critical to pinpoint who will be receptive to this strategy and determine how best to attract them.