5 Components of a Value-based Pricing Strategy

by | Mar 12, 2014 | Empower Sales Conversations

Home 9 Empower Sales Conversations 9 5 Components of a Value-based Pricing Strategy

The reason why many companies fail to capture superior profitability, even after buying price management software and implementing tight pricing over 12 months, is because they fail to implement a value-based pricing strategy that centers on customer value.

To be successful a value-based pricing strategy must include the following five components:

  • Value Creation: Are you developing products with benefits that align with what customers are willing to pay for?
  • Value Communication: Are you communicating how your differentiating features and services impact your customer’s bottom line?
  • Price Structure: Do you have a way of charging customers that tracks the value you deliver across customers and applications?
  • Pricing Policy: Do your discounting policies tell your customer that price is determined by value, rather than aggressive negotiation?
  • Price Management: Are you ensuring that pricing is implemented as intended, and that price level changes reflect true market conditions?

The first two value-based pricing components are considered value management activities while the bottom three components are considered price management activities. By combining the activates using a value-based pricing strategy, enterprises increase the potential for profitable pricing that price management enables them to realize.

To learn more about price and value management, download Price vs. Value Management: Know the Difference

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