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.

Please create a username to comment.

SearchCompliance

  • risk assessment

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

  • PCI DSS (Payment Card Industry Data Security Standard)

    The Payment Card Industry Data Security Standard (PCI DSS) is a widely accepted set of policies and procedures intended to ...

  • risk management

    Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings.

SearchSecurity

SearchHealthIT

SearchDisasterRecovery

  • call tree

    A call tree is a layered hierarchical communication model that is used to notify specific individuals of an event and coordinate ...

  • Disaster Recovery as a Service (DRaaS)

    Disaster recovery as a service (DRaaS) is the replication and hosting of physical or virtual servers by a third party to provide ...

  • cloud disaster recovery (cloud DR)

    Cloud disaster recovery (cloud DR) is a combination of strategies and services intended to back up data, applications and other ...

SearchStorage

  • RAM (Random Access Memory)

    RAM (Random Access Memory) is the hardware in a computing device where the operating system (OS), application programs and data ...

  • business impact analysis (BIA)

    Business impact analysis (BIA) is a systematic process to determine and evaluate the potential effects of an interruption to ...

  • M.2 SSD

    An M.2 SSD is a solid-state drive that is used in internally mounted storage expansion cards of a small form factor.

Close