![]() ![]() discounting that has no connection to value can be halted, new high-value product features or benefits that are usually given away can be made chargeable). But little steps can be taken that ease the transition (e.g. So, given all the benefits, many organizations don’t make the attempt to move to value-based pricing because it seems too difficult. Needs-based segmentation also provides a basis for product configurations that are better aligned to each segment’s needs and messaging that effectively speaks to the key buyer persons in those segments. those seeking all the bells and whistles). Needs-based market segmentation underpins effective value-based pricing, as markets can often be divided by customers’ different needs (e.g. And because the adoption of value-based pricing assumes an ongoing conversation with customers about their needs and the tangible and non-tangible value of meeting those needs, it drives the continuous development of customer-focused products, which often address higher-value needs (and ideally deserve a higher price). They do this even if costs or competitive prices don’t change. Practitioners of value-based pricing make a point of increasing prices as they improve their products or services to deliver more value to buyers. ![]() Second, this approach assumes that prices are increased when the value goes up. For offerings that provide buyers with significant tangible value beyond offering costs, the potential revenue and profit implications can be meaningful. The potential gains from value-based pricing can be significant, depending on the extent of its use and the effectiveness of implementation (from price setting to administration). The Intrinsic Benefits of Value-Based Pricing The approach requires product managers and others responsible for pricing to engage with customers to understand their needs and the value they place on meeting those needs – especially with your offering. Value-based pricing bases an offering’s price on what buyers value, not on competitive pricing or costs. Many product managers and pricing managers tell us they are overburdened they don’t know how to move to value-based pricing, and they are not sure if the benefits are worth the time required. ![]() Why are so many B2B organizations continuing to price their products by cost-plus or competitive pricing? Our recent SiriusDecisions Command Center® survey shows that more than 50 percent of organizations are continuing to use these approaches.
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