A change in marketing logic is underway. The perception that markets are a place where goods are exchanged for money is being replaced with a more nuanced view of service as the fundamental basis of exchange and value as subjective, consisting of multiple dimensions, and realized only through use.
Why is this shift taking place? Has the world changed? Or has our understanding of the world improved? Why didn’t we think of this before?
For many companies, the traditional way to set prices has been some form of cost-plus pricing. In other words, they calculate their costs, slap on a margin, and there they have a price. However, this pricing scheme has come under increasing pressure as of late, and exploration is underway into other pricing schemes.
The most prized goal at the moment is often value-based pricing: determining the value the customer is able to create with the service and adjusting the price accordingly.
In this post, I will look into what value-based pricing is and how a more sophisticated understanding of what value is can help companies on their journey towards value-based pricing.