Pricing
Simplifying Value-Based Pricing
According to Mark Stiving of Impact Pricing, value-based pricing is the concept that you charge what your customers are willing to pay. Conceptually, it's simple enough for kids to understand. Kids aren't overthinking their pricing strategy for a lemonade stand - they charge what neighbors are willing to pay.Â
In practice, figuring out willingness to pay isn't as easy as randomly picking a price point and hitting the streets. Kids with a lemonade stand aren't as impacted by price sensitivity as we likely are with our products - our neighbor-customers aren't going to shop around for a better deal, wait for a price change, or look for a discount.
But value-based pricing is arguably the best way to optimize profits. Does it take a little grunt work? Yes. Is it rocket science? No.
Learn more about value-based pricing:
Dholakia, U.M (2016). A Quick-Guide to Value-Based Pricing. Harvard Business Review. https://hbr.org/2016/08/a-quick-guide-to-value-based-pricing
Stiving, Mark (2021). Demystifying Value-Based Pricing. Forbes. https://www.forbes.com/sites/forbesbusinessdevelopmentcouncil/2021/12/09/demystifying-value-based-pricing/?sh=5344344f3907
Watch the video below for a quick snack about what kids taught me about value-based pricing: