Imagine how much you pay for a bucket of popcorn inside a multiplex. Then, a person who is an admirer of this watch brand would be ready to pay a premium price to own a piece from the designer collection. The company will produce only 1000 such pieces. Following is a list of situations where Value-Based Pricing can be effective −įor example, if a reputed watch maker comes up with a designer collection to mark its centenary. Not every product or service can command a premium price. If we have to define Value-based pricing, then " it's a pricing strategy to calculate the selling price of an item or a service based on its perceived value rather than its actual value." Examples of Value-Based Pricing In Value-based Pricing, a company can charge a significantly higher price for a product or service, and the pricing is completely independent of the manufacturing cost. Value based pricing is completely different from this scenario. In such cases, the price difference between the products do not vary much, because even the premium brand cannot increase its selling price in a disproportionate manner as it would significantly impact the sales volumes. There's a brand value attached to products that belong to a superior brand. We very well understand that a superior brand can charge slightly more for a product than a less-known company that produces the same product, which is the usual case. This is what we call Cost-Plus Pricing strategy where the price of a product is proportional to the manufacturing cost. In general, companies calculate the selling price of a product or service based on the costs incurred in manufacturing that product or delivering that service.
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