Of course, value can be delivered in various ways beyond the core features of a product:īrand reputation and trust - if you’re known for delivering consistent quality and positive experiences, you can typically command higher prices thanks to the reduced risk associated with your brand and products.Ĭustomer service - prompt and helpful responses to inquiries, easy returns and exchanges, and attentive after-sales support can all justify a higher price point.ĭelivery and shipping - offering expedited or same-day shipping, real time tracking and reliable delivery adds value through convenience. In other words, you don’t sell a product as a mere commodity with a physical cost, but as a solution with tangible benefits - which means you can command a higher price for it while keeping your customer base happy. Using VBP, you’d set a price point that reflects these features and the intrinsic worth they hold for the customer. You know your shoes deliver this value through superior shock absorption, innovative arch support and breathable materials. You do your research and find that your target customers place considerable value on the promise of enhanced performance and reduced risk of injury - and they’re willing to pay a premium for it. Say you’re in the fitness market and your hero product is a sports shoe. This alternative pricing strategy looks not at costs and competition but at what a product is actually worth in the eyes of the customer - i.e. This is where value-based pricing comes into play. But this approach may still miss a crucial element - the intrinsic value your customers perceive in your offerings. You might consider a price optimization strategy, where you leverage data to set your prices based on things like demand, inventory levels and competitor pricing. It’s simple, but it overlooks dynamic factors like customer preferences and market demand.Ĭompetitive pricing on the other hand - where you benchmark prices against your rivals - means you risk eroding profits in a race to the bottom. The cost plus approach is an easy road to go down, where you calculate all your costs - production, distribution etc. There’s no shortage of options when it comes to picking a pricing strategy.
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