![]() Are we making it cheaper for our customers to run their business?.Are we enabling more business opportunities for our customers?. ![]() There are many ways that this can be determined but it really boils down to two simple questions: How Do I Find “Value” as My Customers Perceive It? Only after understanding these three main components, can we talk about how to use value-based pricing as a strategy. Okay, I have a product that my customers seem to like, what do I do with this?.What is the next best alternative for my customers? If I was not part of the market, where would they go?.Is our offering enabling our customers in new business opportunities? Is it increasing their margins by reducing their cost of operations?.So, we talk about three components in a value walk: It is a picture that represents what is the value that a customer will obtain from your product or service with information on what else is out there, how our offering is different than that of the competition, and the inherent cost of obtaining it. Imagine a map with directions to go from point A to point B, in most cases, these directions will clearly indicate where to turn and in some cases, it will provide information related to the way such as elevation, any hazards to be encountered along the way and even if there are alternate routes.Ī value walk is pretty much the same. But what is it really? What Is a Value Walk? Same for any product or service that we want to price based on that value proposition.Īnd that is really the first step: understanding the value proposition, the measure through which we know how much our customers will be able to gain if they buy our product or service. If you think of value as a proposition for a business opportunity, it doesn’t matter what the cost of that opportunity might be if the outcome of capturing the said opportunity delivers a higher return on that investment. These are just features that address a specific need for a customer, these needs when satisfied will become benefits and these benefits give way to value when leveraged. When we talk of value, we must be clear that this has nothing to do with what we think our product offers to our customers, e.g., speed, flexibility, good looks, etc. There is a clear distinction between the price that anyone (be it a person or a company) pays for a given product or service and the inherent value that is received as a result. Value-based pricing is founded on the concept that value and price are not the same.
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