Summary of Value Based Pricing

Topics: Pricing, Marketing, Price Pages: 2 (727 words) Published: July 14, 2012
Summary of pricing article
Value based pricing intro
This article is focused on the value based pricing strategy. Traditionally many sellers have taken an approach of charging what the market will bear when it comes to price. This strategy leads to a transactional relationship with the customer which means they will have little to no loyalty. If a competitor comes along with a lower price and the relationship is only based on price then the customer will switch to the lower cost competitor. The article suggests that the strategy of squeezing the customer for all they are worth is not ideal. A better strategy is to practice value based pricing. Value based pricing has been proven to improve suppliers short and long term profits. Value based pricing focuses on strengthening customer relations and maximizing alternative means of profiting from superior value offered by the supplier. In the article there was a good example of Electronic instruments focusing on pricing instead of offering the customer the value that they wanted. Electronic instruments failed to realize that they needed to offer their microscope at a much lower price than the competition in order to break into a market where they had not previously competed. By charging an initial lower price and then offering add-ons that customers desired Electronic instruments would have been much more successful. Six main questions asked when implementing value based pricing There are six main questions that a supplier should ask when trying to implement value based pricing value based pricing. 1 What is the marketing strategy for the segment?

When considering the marketing strategy the supplier should think about how price premiums can support the strategy. Price premiums in and of themselves although helpful are not strategies. The supplier’s strategy should be focused on ideas like obtaining a larger share of the customer’s purchase requirements or a more profitable mix of the customer’s...
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