If you ask business owners, CEOs, or managers what pricing strategy they would prefer for their products or services, odds are that seven out of 10 respondents (if not all) will pick value-based pricing over all other strategies. However, as much as this pricing method is desired because of its high-profit margins, not many businesses are in a position to command higher-than-above-average market prices, nor do they have the technical know-how to implement it.
Any business desiring this pricing method needs specialized knowledge and expertise, which only a value-based pricing consultant can effectively deliver. A pricing expert with vast experience in executing value-based pricing will not only design a marketing strategy that can quickly tap into new opportunities, but he/she will also make the plan flexible enough to adjust to spontaneous shifts in market needs and behaviors.
Value-Based Pricing/Value-Based Pricing Consultants
What Is Value-Based Pricing?
To get a good understanding of who value-based pricing strategy consultants are and what it is they do, we’d like to touch on what value-based pricing is. Without going into much detail, value-based pricing is simply a type of pricing strategy where prices are set primarily on how much the consumer or client thinks the product/service is worth.
Put another way, the seller prices his/her goods not on how much it costs to produce the goods but on the customer’s perceived value of the said product. It is for this reason, value-based pricing is commonly referred to as customer-focused pricing.
Who Are Value-Based Pricing Consultants?
Value-based pricing consultants are specialists who help businesses develop and execute a value-based pricing plan. In order to accomplish this, they carry out deep research into the company’s target audience, their needs, what consumers think the product/service is worth to them, the broader market, and competitors’ product offerings.
Value-based pricing consultants also help companies regain their pricing power, especially in situations where pricing pressures from competitors have led to unprofitable pricing practices. With their input, companies are able to develop the most appropriate pricing framework that can better capture value. They also contribute to product development as well as the marketing plan to promote the products from a value perspective.
What Do Value-Based Pricing Strategy Consultants Do?
Any savvy business leader knows that implementing a value-based pricing strategy is more than just raising prices. There is a lot more involved, from in-depth research of the market to actually bringing the strategy to fruition. This is what pricing specialists do, and some of their job functions entail:
Collecting data about customer’s willingness-to-pay
The first step to transitioning to value-based pricing for any company is to conduct adequate market research. The pricing consultant investigates the maximum amount the target customers would willingly pay for the company’s products or services.
This type of work is time-consuming and difficult for most companies to handle on their own because different customers place different valuations on a product. Nevertheless, it’s important to collect this information so as not to price the company’s offerings beyond what customers can afford or beyond what they think is a fair price for the product in question.
Helping companies create higher quality products/services
Taking into consideration the consumer’s perspective when making business decisions helps companies discover what extra features or solutions would raise the value of a product. This information is one of the many pieces of data that value-based pricing consultants gather during their market research. With this information on hand, the pricing consultant can work with the company to generate new ideas for supplementary features that will increase revenue and lead to a more dynamic customer experience.
Assisting companies to create a sustainable and top-notch marketing strategy
A company that wants to fix its prices based on value rather than on cost or what competitors are charging should be ready to apply a value-based marketing and selling strategy. That is the only way the plan can be successful. Selling to customers who are willing to part with a premium price for a product requires an exceptional marketing plan.
Also, it would require that everyone in the company, especially the sales and marketing team, acquire new selling skills. Value-based pricing consultants guide companies in developing a selling and marketing strategy that would resonate with their target audience.
Why Hire A Value-Based Pricing Consultant Or An Interim Pricing Strategy Manager?
Besides collecting data on price valuations and performing price sensitivity measurements, there are several other reasons why companies choose to hire a value-based pricing consultant. Some of the reasons include:
Smooth transitioning to value-based pricing
Most managers and business owners don’t have the expertise or technical knowledge to successfully implement a value-based pricing strategy and within a reasonable time frame. Value-based pricing specialists, on the other hand, have sufficient experience in gathering relevant data from the market, sifting out irrelevant info. By working along with a pricing expert, companies can avoid the costly mistakes related to pricing too high or too low.
It’s a given that successful execution of value-based pricing helps a company reaps the highest profit possible. However, that can only be achieved if the product or service brings the greatest value/benefits to customers. During their market research, value-based pricing consultants meticulously gather information concerning whether a product meets all the customer’s needs it’s supposed to meet.
If some of the needs are not met and based on the data collected, consultants do suggest features and enhancements that could allow the company’s pricing team to charge more. As a result, the company is able to unlock more profits and boost revenue from existing product lines.
A Typical Case Study from Value-Based Pricing Consulting
How does value-based consulting work? Below is an example of a fictitious business implementing this type of pricing method.
Maggie sells one-of-a-kind fashionable jackets. Let’s say the following is the total cost associated with a particular jacket.
Selling price: $50
Total cost: $58
Assuming Maggie will be implementing cost-based pricing, what she’ll do in this case to apply a given percentage to her cost price, and that’s that. But since she wants value-based pricing, she will consider the value that her jacket brings to the customer. For instance, imagine she considers the following value:
Value I: There are only 200 pieces of this specific jacket made by the manufacturer, so the jacket is a limited edition.
Value II: The jacket is an original piece made by a famous trendy designer.
Value III: The exact design was worn by a celebrity to an award ceremony and is labeled as the in-vogue design for the season.
Maggie could consider the above values and charge as high as $250 for this jacket instead of marking it up by 20% (cost-based pricing) and selling it at $69.60.
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