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.

-ADS BY GOOGLE

File Extensions and File Formats

Powered by:

SearchCompliance

  • risk management

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

  • compliance as a service (CaaS)

    Compliance as a Service (CaaS) is a cloud service service level agreement (SLA) that specified how a managed service provider (...

  • data protection impact assessment (DPIA)

    A data protection impact assessment (DPIA) is a process designed to help organizations determine how data processing systems, ...

SearchSecurity

  • quantum key distribution (QKD)

    Quantum key distribution (QKD) is a secure communication method for exchanging encryption keys only known between shared parties.

  • identity theft

    Identity theft, also known as identity fraud, is a crime in which an imposter obtains key pieces of personally identifiable ...

  • cybercrime

    Cybercrime is any criminal activity that involves a computer, networked device or a network.

SearchHealthIT

SearchDisasterRecovery

  • disaster recovery plan (DRP)

    A disaster recovery plan (DRP) is a documented, structured approach that describes how an organization can quickly resume work ...

  • business continuity plan (BCP)

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

  • disaster recovery team

    A disaster recovery team is a group of individuals focused on planning, implementing, maintaining, auditing and testing an ...

SearchStorage

  • logical unit number (LUN)

    A logical unit number (LUN) is a unique identifier for designating an individual or collection of physical or virtual storage ...

  • NVMe over Fabrics (NVMe-oF)

    NVMe over Fabrics, also known as NVMe-oF and non-volatile memory express over fabrics, is a protocol specification designed to ...

  • CIFS (Common Internet File System)

    CIFS (Common Internet File System) is a protocol that gained popularity around the year 2000, as vendors worked to establish an ...

Close