Value-Based Pricing Finances Hamlet's Castle
The seeds of value-based pricing were planted centuries ago with the first documented use of value-based pricing metrics to improve profitability. The use occurred in the 15th century when Erik of...
View ArticleTie-Ins as Metrics
A very common challenge for a company that sells capital goods is that the value of owning them can vary widely across segments based upon how intensely they are used. For example, a company that makes...
View ArticlePerformance-Based Metrics
An ideal price metric would tie what the customer pays for a product or service directly to the economic value received and the incremental cost to serve. In a few cases, called “performance-based”...
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Creating Good Price Metrics
There are five criteria for determining the most profitable price metrics for an offering. The first criterion for a good price metric is that it tracks with differences in value across segments. While...
View ArticlePRICE METRICS
Not all differences in value across segments reflect differences in the features or services desired. Value received is sometimes not even related to differences in the quantity of the product...
View ArticleUnbundling Strategically
While bundling can be a profit-enhancing strategy for segmentation, it often has the opposite effect when variable cost services are bundled simply to differentiate an offering. For example, a...
View ArticleDesigning Segment Specific Bundles
Bundling can also facilitate segmented pricing, thus increasing profitability, when different customer segments have different price sensitivity for a “core” product or service (for example, lodging at...
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Optimizing an Offer Bundle
By creating more than one bundled option designed to appeal to different segments, a marketer can get most of the benefits described above along with the financial rewards of segmentation. Auto...
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PRICE-OFFER CONFIGURATION
When differences in the value of an offer across segments is caused by differences in the value associated with features, services, or both, a seller can segment the market by configuring different...
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Tactics for Pricing Differently Across Segments
After developing products or services that create value, a marketer must then determine how most profitably to capture that value in both volume and margin. The challenge in doing so is that customers...
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