Value Based Pricing

Hi,

Value-based pricing can be done in 2 ways:

• For existing products, you identify what it the economic value and perceived value for the customer. Also, you compare the value proposition and features of your product vs. the VP of your competitors. If you have a significant difference in value prop - you have to define how much value you propose to the customer in $ terms. (e.g. your product may have additional customer support, better packaging, additional features and thus should be priced hire. Or it should be priced the same and you will win the market share due to these differences)
• For the new products, you can calculate the closest alternatives and think how much additional value we provide by replacing them. Think of the discount airlines compared to trains or buses

Best

I want to second what Benjamin said! This is the essence of what you need to understand. Just a clarification to avoid any confusion: we have to identify the value forthe client's customer (i.e., the user of the product), thereby deriving their maximum willingness to pay (WTP).

Cheers, Sidi