Business Strategy Articles

Have Courage and Create a Value-Based Pricing Strategy for Your Business

When deciding on pricing for your product or service, there is a sweet spot that will allow you to outprice your competition while still raking in sales. This sweet spot will allow you to make a significant profit margin while remaining competitive in the marketplace. Finding this sweet spot, though, requires you to have one magical thing: a value-based pricing strategy.Four stacks of coins signifying an increasing profit by using a value-based pricing strategyFour stacks of coins signifying an increasing profit by using a value-based pricing strategy

Cost-Based Pricing vs. Value-Based Pricing

A cost-based pricing strategy is a default for many businesses. You consider the minimum cost to produce a product or service, then mark it up based on what a customer is willing to pay for the features and benefits you offer. But, of course, the cost can fluctuate depending on the stability of the market and the prices of your competitors’ products. 

On the other hand, a value-based pricing strategy has little to do with the product itself and everything to do with how it’s perceived. Think about luxury brands such as Gucci or Rolex. While some of the elevated costs involve the premium materials used to produce a final quality product, let’s face it—you’re mostly paying for the prestige of the brand name. 

Pricing a product higher than the rest of the market implies an inherent value. Whether true or not, people usually associate low prices with a cheaper, lower-quality products. On the other hand, to some extent, if they’re paying a lot for something, it must be good. 

How to Price Your Services

Although you should strive to stay competitive, you shouldn’t settle for a lower price for your product just because it’s what the competition is doing. Instead, it would be best to increase your prices with a value-based pricing strategy to match the value you truly bring. 

Value-based pricing allows you to earn more profit per product sold in general, although you may lose some sales to lower-priced competitors when customers are looking for something quick and cheap. The key is demonstrating a perceived value by creating an aspirational image of your product. 

You can achieve this image through strategic marketing, luxurious branding, and accumulating a solid reputation over time. You can also increase perceived value through years of industry experience, higher-quality materials, additional features and benefits, limited editions or quantities, and generally making your product seem more desirable. 

While it might not be the preferred strategy for every single business, the fact is that almost any company can implement a value-based pricing strategy to increase its profits. Even if you’re not offering luxury goods, you can still sell the customer an experience that outmatches the competition. All it takes is a little imagination and some creative brand storytelling. 

A business coach can help you uncover 
how to price services for a business
. Please complete my contact form for a complimentary coaching session to discuss building your value-based pricing strategy. You can also sign up for my free weekly blog articles for valuable small business content.

Coach Dave

 

10 CRITICAL RESPONSIBILITIES OF A BUSINESS OWNER

LEARN MORE about the book or fill out the form below to download it.

Follow Dave
Dave Schoenbeck

Dave Schoenbeck is a professional business and executive coach who translates complex business methods, processes, and strategies into actionable plans to dramatically improve financial results. Read more about Dave here.

Share
Published by
Dave Schoenbeck

Recent Posts

Successfully Navigating Supply Chain Disruptions

Business owners can face unprecedented disruptions to everyday processes when the future feels uncertain. An…

1 day ago

How to Create a Customer Referral Program for Your Small Business

Customer referrals are indispensable if you want to grow your customer base organically. A referral…

1 week ago

Tips for Maximizing Marketing ROI for Your Small Business

Why is marketing return on investment (ROI) so difficult to measure? The truth is that…

2 weeks ago

How to Create a Resilient and Adaptable Culture in Your Business

Cultural resilience is when an organization’s ability to adapt to uncertainty is baked into its…

3 weeks ago

Why is Emotional Intelligence Important in the Workplace?

Studies have shown that 90% of top business performers demonstrate high levels of emotional intelligence…

4 weeks ago

Is Proactive Leadership Always the Best for Businesses?

Most managers and CEOs believe they should be proactive rather than reactive. This makes sense:…

1 month ago