In a commercial sense, pricing based on value alone has always had many advantages and therefore holds a certain level of power. This is as it undeniably means profits for companies, whilst simultaneously meaning an added value for customers. At Highwoods & Associates, we have compiled this blog post in an attempt to explain how value-based pricing holds market power.
What effect does poor pricing have on a company?
It can be argued that many companies fail on account of their inability to correctly price up their product. The inability to effectively deploy an effective pricing strategy on the products sold can have a massive negative impact. For example, it leaves too much opportunity to price your product too high. This means that in the eyes of the consumer, the product is not worth the money, which leads to fewer sales and less profit. The same is true if a product is priced too low. A whole lot more of the product would have to be sold to ensure a profit.
How can I ensure that I correctly price my product based on its value?
To ensure that you correctly price your product based on its value, you must take a step back and evaluate your product and its ability to hit three product satisfaction criteria, such as:
– Factors of preference (would it be chosen over a similar product?)
– Factors of hygiene (do they have the product in your size, for example)
– Drivers of value (would clients or businesses pay attention to your product?)
The higher that your product scores concerning these three criteria mean that you can sell it for a higher, value-based price. It also means that you have optimised your product’s full market potential.
For more information on the market power that value-based pricing holds, contact our team at Highwoods & Associates.