Value Pricing First Rule
Updated: Jul 30, 2020
With not a few organizations we started to work with, we had some good discussions around “Value Pricing”.
Sometimes, these organizations have spent years, resources and energies to develop Value Pricing… but no real and tangible results. In fact, nice and “sexy” conceptual exercise, but no positive (or at least demonstrated) impact on the business.
Other organizations tried to understand how to start and progress towards value pricing… but struggled in the “pricing psychological stone”: Sales and customers are just talking about price …. And if Value Pricing is about to remove the price dimension … does it make sense?
For these 2 kinds of organizations, the answer is simple … you must look at Price and Value as the 2 dimensions of the same value proposal.
Sometimes, even, the price is impacting the value perception of your product … “If it’s more expensive, it should better” … or “I buy this expensive product because I pay for exclusivity” …
And at the end, most of the time, the buying decision is a balanced one between the price and the value … what is called also the “willingness to pay for value” … or the “fair value price” …
So, if you don’t know “your” price, including Price List (Street Price), Gross Price, Reference Price … Sell In / Sell Out for Distribution ….and your discounts, rebates, charges, samples for free, cost to serve and cost to sell … etc …. And at the end what is the “real price” the customer is paying as the “Customer Pocket Price”….. you can’t understand … and you can’t do Value Pricing …