![]() To consumers, price is a numerical evaluation of how much they value what you are selling. Value based pricing: It's all about the customer (and the benjamins) To understand value based pricing, let's take a look at what value based pricing entails, uncover the methodology's pros and cons, before exploring who should and shouldn't utilize value based pricing. Yet, like all methodologies, it has some quirks. Fortunately, value based pricing, when done correctly, provides valuable data to shrink that dartboard down tremendously. We’ve already learned that cost plus pricing and competitor based pricing can be useful, but they’re fairly weak overall, especially in the SaaS or software space. Data and these methodologies eliminate that space, guiding your dart to the ideal price point. The metaphor we’ve been using (some of you like it, some of you don’t) is a dartboard where you’re trying to hit a bullseye with the perfect price, but there’s all that extra space “distracting” your dart. Remember what we said last time, pricing is a process that utilizes data to eliminate as much doubt as possible for key stakeholders to make a profit maximizing decision. ![]() Value based pricing is the pinnacle of pricing if you can figure out how to get there (more on this below). ![]() We elaborated on this assertion in a previous pricing strategy post, but realize that a 1% improvement in price optimization results in an average boost of 11.1% in profits. We’re beginning every one of these posts with the same statement: “ Pricing is the most important aspect of your business.” No other lever has a higher impact on improving profits.
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