Value-based Pricing

Prices should reflect the value of a product as the customers perceive it (“willingness-to-pay”).

Value-based pricing is an effort to extract this perceived value from the market. This involves quantifying perceived value and increasing it whenever possible—i.e., when the customer’s willingness to pay for the increased value exceeds the cost of delivering it.

Companies extract the most value by setting prices strategically. To maximize overall profits, they need to determine the price elasticity of their customer segments.

Our sophisticated, quantitative methods are used to answer complex questions like:

■ How much do quality, distribution, service, etc. contribute to perceived value?
■ How much is a performance improvement of x% worth to the customer in dollars and RMB?
■ How much will our market share increase if we improve our performance by x%?
■ How can we differentiate among customers by the degree of importance they assign to quality, service, price, etc.?