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Value-based price, also called value-optimized pricing or charging what the market will bear, is a market-driven pricing strategy which sets the price of a good or service according to its perceived or estimated value. [1]
It is also known as perceived-value pricing. Value-based pricing have many effects on the business and consumer of the product. Value-based pricing is a fundamental business activity and is the process of developing product strategies and pricing them properly to establish the product within the market.
Determine the different value elements that impact a customer (both positive and negative). [3] Assign a monetary value for each element. Determine the selling price of the next-best-alternative to the product or service offered. [citation needed] The cumulative monetary value for each element is known as the "total additional value."
Value-based pricing: (also known as image-based pricing) occurs when the company uses prices to signal market value or associates price with the desired value position in the mind of the buyer. The aim of value-based pricing is to reinforce the overall positioning strategy, e.g., premium pricing posture to pursue or maintain a luxury image. [4] [5]
Price Sensitivity Meter (van Westendorp) The Price Sensitivity Meter (PSM) is a market technique for determining consumer price preferences. It was introduced in 1976 by Dutch economist Peter van Westendorp. The technique has been used by a wide variety of researchers in the market research industry. It historically has been promoted by many ...
Cost-plus pricing is a pricing strategy by which the selling price of a product is determined by adding a specific fixed percentage (a "markup") to the product's unit cost. Essentially, the markup percentage is a method of generating a particular desired rate of return. [1] [2] An alternative pricing method is value-based pricing. [3]
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Indeed, the price elasticity of demand varies between types of purchase and among consumer segments. This is the process that companies use to adjust demand by setting prices. [11] Three price-setting strategies are generally employed: value-based pricing, cost-based pricing and rent/lease pricing.
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