What is value oriented pricing ?
- The price of any product reflects the targeted customer’s willingness to buy the benefit.
- Price setting represents a tremendous challenge because of its dependency on the correctness of the value proporision
- Even if the value proposition seems correct, there may be other intermediating factors that customers simply will not accept.
- For the marketing plan, the pricing strategy need to be called out in the following ways:
- The list price(s) of the product
- The linkage of the pricing rationale to the value proposition
- The linkage of the pricing model to the unit volume and revenue forecast for the product
- This is critical because price and volume are inextricably linked
- If the price is too low, you may sell too many units, and if the price is too high, you may sell too few.
- The more unique the product, the higher the perceived value and the more likely that you will be able to charge more
- Any discounting programs that would be acceptable.
- This means that “floor pricing” should be established to that sales people know how much can they discount in a competitive situation
- Below are some of the influences on pricing strategies:
A broad understanding how to derive pricing that customers are willing to pay for the value being sought or delivered by your products.
Source: Haines, S. (n.d.). The Product Manager’s Desk Reference.