Value

Why you should go for Value based Pricing

What is Value-based Pricing? Value-based pricing is a price-setting strategy where prices are set primarily on a consumers’

Published By - knowledgeNile

What is Value-based Pricing?

Value-based pricing is a price-setting strategy where prices are set primarily on a consumers’ perceived value of the product or service. It is completely different than the cost-plus pricing; which is a pricing strategy in which costs of production influence the price. Companies that offer unique or highly valuable features or services are better positioned to take advantage of value-based pricing than are companies with commoditized products and services.

Why should you go for a value-based pricing?

Value-based pricing is dynamically changing the modern accounting world. Here are three great reasons to base your pricing to go for a value-based pricing

Get your employees on board:

It’s not just your clients you need to consider when implementing value-based pricing. It’s important to get your employees to buy into the new model as well, since they’ll be doing the work for the clients and adding value.

Making the shift to a value-based pricing model will benefit both you and your clients. It’s becoming the best and most effective way for you to improve profitability, and it also means the client pays based on the value of your expertise—not how long it takes you to perform those services.

Getting to know your Clients.

By placing a premium on the opinions of your customers, you are focusing on the people who will be making the buying decisions. They are the ones that will eventually be deciding whether your pricing and packaging is correct. If not, they won’t be buying.

Incentives to provide more

Pricing also isn’t just about the number on the page. It is about how you package and offer your selection of products and features, and to whom. This approach to pricing will help you understand what your customers truly want, and what features should be developed over time. Once you have developed your minimal viable product, your features and product updates should be driven by consumer demand.

Value for your service.

This is the main reason you have to go out and ask your potential customers the value they see in your product. You need to know what customers will actually pay for your product. Competitor-based pricing does this in a roundabout way. If they are willing to pay $100 for your competitor, then they must be willing to pay $100 for your product as well. But this misses the fundamental point that your product should be different to your competitors. It should offer more value, and therefore priced differently.

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