Value-based pricing is pricing according to the value of the benefits delivered to customers in comparison to the competing alternatives. The pricing industry has broadly accepted value-based pricing as superior to alternative paradigms. But how do executives functionally arrive at prices that are aligned with the principals of value-based pricing? What techniques do they use? What are the trade-offs between the competing methodologies? What process steps are executed to deploy these methods? And how can these methodologies be used to engage positive collaborations with product managers, salespeople, finance departments, and marketing communications professionals?
In How to Price, Tim J. Smith, PhD clarifies the three industry-dominant pricing methodologies in practice today and their relationship to value-based pricing: exchange value to customer, conjoint analysis, and economic price optimization. Each of these methodologies is an industry-proven, academically accepted best practice for addressing pricing challenges. Each is superior in some cases but inferior in others. Each uses market research data to understand customer choices but the type and sources of the data differ between them greatly.
The objective of this course is to inform executives of the dominant pricing methodologies in the market and enable them to select the right approach for whatever price-setting challenge they face.
Pricers will learn:
- The proper definition of value from the customer’s perspective, and therefore what value-based pricing really means.
- How to price new products and services according to their exchange value to the customer
- How to gather the information required for quantifying exchange value
- How to conduct a profit sensitivity analysis to inform pricing decisions
- How data can be used to conduct economic price optimization
- Why economic price optimization is limited in its application
- Why pricing based on the customer’s perception of value is so important
- What conjoint analysis is and why is it superior to other survey-based pricing approaches
- How to identify neutral, skim, and penetration pricing strategies
- How to anticipate competitor price response to pricing actions
- How to identify opportunities to increase profit through examining the relationship between prices and benefits