How Consumer Value-Based Pricing can help your Business

Many businesses often face the dilemma of pricing their new product or service in a way that is attractive to the target market and competitive with the existing products. Finding the perfect balance is the one where we can charge a maximum while selling the most units. Any price above this threshold will start alienating the consumers.

There are many strategies which a company can adopt. The correct one depends on the nature of the business, target segment, goals of the company, and the desired position for the brand.

One of the best pricing strategies for a consumer-centric company is Consumer Value-Based Pricing. It takes into account how much consumer perceives the value of a product/service. If we can effectively communicate to the consumers that our product has valuable features and is high-quality, it becomes easier to increase the perceived value. Thus, we can charge a higher price. It should be kept in mind that these claims are genuine because marketing gimmicks like this don’t go long.

For example, the value of a painting, including raw-materials and person-hours, might be $100, but if it is from a famous painter, the perceived value can be in thousands of dollars.

A company using this pricing strategy should be-

1. Consumer-centric, meaning any changes or improvements in the products, should be based on consumers and their needs. The service provided to the consumers should be of high quality too.
2. The company should have bi-directional communication with the consumers and value their feedback, answer their queries, and listen to their needs.

Many industries like fashion, pharmaceuticals, cosmetics follow this strategy. For understanding, if the value-based approach works for you, it is essential to have a sales forecast at a different price point to understand what price provides maximum revenue. Many tools are available online for this analysis, like Hubspot free sales pricing calculator.