High prices generally make consumers perceive products to be of a superior quality, so the brand value of those products is also increased. Setting a high price for a product immediately increases the value of the brand, which in turn can increase the customer perceived value of the product. These competitive pricing advantages include: There are three main advantages to using a value-based pricing system.
#COMPETITOR BASED PRICING STRATEGY FULL#
Cost-plus pricingĬost-plus pricing means calculating the full cost of acquiring an item you buy to sell, then selling it at a higher percentage for profit. You may also keep your prices exactly the same as your competitors and rely on other elements to attract customers, such as superior promotion or packaging. This means you can present your product either as the cheaper alternative or as a more expensive premium version. The competitive pricing advantages of this strategy are that you can market your product according to the prices set by your competitors for similar products. This pricing method allows you to set a much higher price and increase the profitability of each sale, although the product or service must have a very high perceived value in the eyes of the customer for this strategy to work. This means the price is not determined by however much the product or service costs to produce or provide, but by how much the customer is willing to pay for it. What is value-based pricing?Ī value-based pricing strategy involves setting the price of a product or service according to the customer’s perceived value of said product or service.
Here we will focus on the competitive pricing advantages and disadvantages of using value-based pricing to sell a product or service. Value-based pricing is one of numerous pricing strategies that can be used to set the price of a product or service, with each having advantages and disadvantages that make them more suitable for certain markets and industries.
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