Value Based Pricing

Value based pricing is a concept supported in most businesses - however the reality often falls far short of the rhetoric. The promise of well executed pricing strategy is substantial - the potential margin increase is typically 2-4% of gross sales and our experience has shown double digit improvement is achievable in some circumstances.

However, inability to execute on the promise of value based pricing often arises from a practical inability to understand what ‘value' really is, and a lack of belief and experience in capturing this value through price management.

This is symptomatic in both good times and bad. In a growing economy the pricing challenge is typically accompanied by aggressive sales targets - and efforts to increase price do not flow to the bottom line. In an economic downturn the focus is on protecting sales volumes - often at the cost of reduced margins. Even tinkering to improve pricing outcomes has risks - with real chance of losing market share and margins if you get it wrong - and it does happen.

Pacific Strategy Partners has implemented value based pricing for clients across many B2B markets including steel products, timber products, industrial consumables, paint, explosives and consumer goods. We have also brought our experience from many B2C industries with vastly different levels of pricing sophistication including airlines with sophisticated pricing models to manage perishable products, insurance companies focusing on micro segment risk profiles, elasticity and replicating competitor pricing models, and retail banks with sophisticated customer profitability and behavioural incentives.

Working across multiple industries has enabled us to identify the early indicators of good and bad practice and the challenges typically encountered by organisations as they develop pricing capabilities. This document outlines typical indicators of improvement potential and key lessons from our experiences.

Download: Value Based Pricing. For more information, please contact us via This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

Newsletter Subscriber: