Browse Definitions:
Definition

value-based pricing

Contributor(s): Matthew Haughn

Value-based pricing is a method of arriving at an amount to charge for goods or services through assessing their perceived value to the purchaser. The value-based model contrasts with cost-based pricing strategies, such as cost-plus.

Generally businesses use value-based pricing as a means to a higher profit margin. In the consumer market, customers are often willing to pay more than a cost based pricing model, especially with emotional purchases. Customers may assess one company's product to be of greater value than a competitor's for many reasons including brand image, design, packaging, marketing, warranties, previous experiences and word of mouth. Apple, for example, has traditionally been able to achieve a higher profit margin because of the perceived cachet of its products and brand.

Companies that set good value-based pricing take into account how customers see their product in the context of competitor's offerings. Once an objective assessment and comparison of the strengths and weaknesses of the products are made, a realistic value to the customer can be estimated for each difference and the estimated values can be used to determine a reasonable value-based price for the product.

See also: wholesale price, list price, net price, fixed price, manufacturer's suggested retail price (MSRP)

This was last updated in May 2016

Continue Reading About value-based pricing

Start the conversation

Send me notifications when other members comment.

By submitting you agree to receive email from TechTarget and its partners. If you reside outside of the United States, you consent to having your personal data transferred to and processed in the United States. Privacy

Please create a username to comment.

-ADS BY GOOGLE

File Extensions and File Formats

SearchCompliance

  • internal audit (IA)

    An internal audit (IA) is an organizational initiative to monitor and analyze its own business operations in order to determine ...

  • pure risk (absolute risk)

    Pure risk, also called absolute risk, is a category of threat that is beyond human control and has only one possible outcome if ...

  • risk assessment

    Risk assessment is the identification of hazards that could negatively impact an organization's ability to conduct business.

SearchSecurity

  • security information and event management (SIEM)

    Security information and event management (SIEM) is an approach to security management that seeks to provide a holistic view of ...

  • polymorphic virus

    A polymorphic virus is a harmful, destructive or intrusive type of malware that can change or 'morph,' making it difficult to ...

  • cyberterrorism

    According to the U.S. Federal Bureau of Investigation, cyberterrorism is any 'premeditated, politically motivated attack against ...

SearchHealthIT

  • accountable care organization (ACO)

    An accountable care organization (ACO) is an association of hospitals, healthcare providers and insurers in which all parties ...

  • patient engagement

    Patient engagement is an ideal healthcare situation in which people are well-informed about -- and motivated to be involved -- in...

  • personal health record (PHR)

    A personal health record (PHR) is a collection of health-related information that is documented and maintained by the individual ...

SearchDisasterRecovery

  • business continuity and disaster recovery (BCDR)

    Business continuity and disaster recovery (BCDR) are closely related practices that describe an organization's preparation for ...

  • business continuity plan (BCP)

    A business continuity plan (BCP) is a document that consists of the critical information an organization needs to continue ...

  • call tree

    A call tree -- sometimes referred to as a phone tree -- is a telecommunications chain for notifying specific individuals of an ...

SearchStorage

SearchSolidStateStorage

  • hybrid hard disk drive (HDD)

    A hybrid hard disk drive is an electromechanical spinning hard disk that contains some amount of NAND Flash memory.

Close