#3 Value-Based Pricing, Part 1
If you charge less than your customers are willing to pay based on the value they derive from your products, you are letting your customers keep your money in their pockets. Here are some things to consider when looking at your pricing through a value-based lens:
- Set pricing based on the value to the customer, not on a cost-plus basis or “what you’ve always charged” or “what the other guy charges.” Understand what unique value you offer to the customer and set pricing to extract price consistent with that value.
- Customers are rational consumers of your products and therefore will want to pay the lowest price possible. That’s their job. That means they will sometimes tell you the price is too high. It does not necessarily indicate you are overpriced. It is your job to combat price objections by relentlessly delivering value and communicating your unique value proposition.
- Customers generally don’t make price-based decisions unless they don’t perceive a value difference between competitors. Customers generally make value-based decisions, which means you can be priced higher than your competitors and still win the business, as long as you offer a superior product. The real reason customers buy from you (or not) rarely boils down to price as the most important consideration.
(This is the next in a series of blog posts that dive deeper into strategic pricing tips posted on 8/14/14.)