Value-based pricing strategies centre on your potential customers’ perception of the product to set the prices. How can you adopt this pricing strategy in your eCommerce catalogue? Is it the most suitable for your products?
7 components of the value-based pricing method
The classic pricing strategies are based on costs, value, and competition. In this case, value-based pricing strategies are those that study how much the user is willing to pay for a product. Based on their criteria and the perceived value of the good or service they’re going to acquire, each store and retailer can define the “price” concept for their entire catalogue.
In many cases, this study is carried out before product launch, using focus groups, real use cases, and so on. However, knowledge of the market and the demand is a crucial foundational factor used to position yourself on one side or another. But, what factors are involved in this perceived value on the part of the potential customer?
- The importance that the product or service holds for the consumer in their daily routine: food, cosmetics, cultural items, etc.
- The lifespan of the product, whether it’s a fast-moving consumer good, an active, durable consumer good (like a car or jewellery), or an experience which, although it may be fleeting, remains as a conscious memory.
- The users’ expectations relative to the product, what having it in their hands or not will really make them feel.
- The existence of substitute products if it’s not unique in the market.
- The originality of the product or service when compared to the competition, which results in the possibility of being replaced or not, based on the quality–price ratio as determined by the user.
- The setting of reference prices in the market, which create a barrier causing the brand to overexpose or undervalue its own product.
- The need to purchase the product as a complement to another, whether better or more basic, such as the accessories needed for computer equipment, spare parts for vehicles, or even refills for cleaning products.
Which products can be adapted to a value-based pricing strategy?
In general, all products can be adapted to a value-based or market-based pricing strategy, as these are also known. However, there are certain lines that, since they are not constrained by the barriers of the market, offer more space to play.
Normally, the greater the perception of the quality—even of the luxury—of a product, the greater the probability of it fitting into this value-based pricing strategy. We only have to look at examples in the technology, cosmetics, perfumes, and gourmet areas… When it comes to marrying this type of pricing strategy with the main lines of your business, you only have to find this type of product to adapt in order to achieve the greatest profits.
Premium versions: the perfect format for value-based pricing
Like with the high-end products, pricing strategies for premium versions and services are positioned as clear options to use in value-based pricing.
If you have any doubts as to how to implement this, carrying out a test of this type of service, giving the user some kind of bonus for their subscription or purchase, can shed the light you need. Try out different pricing options with the help of a price intelligence tool to monitor sales results and compare them with the competition. Put yourself to the test!