Archives tagged: value-based pricing
Once the investment is made, its cost no longer factors into the marginal cost of producing a product. Fixed costs are an important part of a go-or-no-go decision for a company at the onset of production, but should not factor into the price of a product going forward. Fixed costs are sunk costs.
More So what do executives get wrong about pricing? They treat it as a noun not as a verb. Treating price as a verb drives executives to define the culture, organizational structure, and process for making pricing decisions. Leading firms do this. Failing firms don’t. Executives, you have a choice.
More Different consumers care about different things. Some will care that their THC-laced gummies have fewer other chemicals, some won’t. But the ones that do are probably willing to pay a premium for those products. We certainly see that in the organics aisle at a grocery store. Why would cannabis products be any different?
More Not that I can or am stating that everything Sony did was perfect. And I am definitely not stating that everyone will find Sony’s design tradeoffs to result in a good offering. But they did define their target market and product design requirements in such a manner broadly appearing to be compatible with a highly successful product, launch.
More Notice the deal specificity. Target prices are deal dependent. That means it can vary between customers and between selling opportunities with the same customer. Target prices may be customer dependent, product mix dependent, quantity dependent, promotional timing dependent, competitive situation dependent, or even cost dependent.
More Pricing Done Right provides a roadmap for improving pricing practices within any market-oriented firm. It provides a framework for managing pricing decisions in any organization. It clarifies the best practices for defining the organizational culture, architectural hierarchy, and routines for getting pricing done right.
More Pharmaceutical formularies, like other medical solutions, are best priced according to the value they deliver relative to the alternative treatment for the target disease. If the new solution provides more value, it should have a proportionately higher price. If it provides less value, it should have a proportionately lower price. This is the concept behind value-based price: price to reflect the prices of alternatives adjusted for their differential value for the target customer.
More Getting back to the shop-floor example: what if you realized that you ended up buying a few million dollar worth machinery but had to retain the workforce to run the machines as per requirements? In fact you ended up renting a bigger floor to accommodate the humans and machines?
More The pricing software revolution is in full swing so who needs people anymore? Tim J. Smith, PhD takes on the thorny question of the information revolution impacting entry level and mid-tier pricing jobs and actually finds good news.
More Value-based pricing talks about pricing based on whether a product provides more or less perceived value with respect to the next best alternative. In the case of professional services however there is a slight difference — since there is the “human touch” involved we can’t be sure whether the next best alternative is a true alternative at all.
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