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Strategic Marketing Science provides nine different strategies for Pricing based on product quality (see below). The reality is sometimes Strategic Pricing is contextual to competitive pricing or other uncontrollable factors.
Organisational resources, marketing effort, and budget also play in selecting the best Pricing Strategy. Advanced pricing strategy is about advanced marketing management: Real-time, for each individual segment! Value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing.
For many industrial products, the costs perceived by customers extend well beyond the price charged. An industrial purchaser perceives the cost of equipment as including installation, maintenance, training and use of consumables, as well as the basic purchase price. Equipment purchases are evaluated over their economic lives and comparisons between competitors go beyond straight price assessment. The company bases its price largely on competitors’ prices, with less attention paid to its own costs or demand.
In oligopolistic industries that sell a commodity such as steel, paper or fertiliser, companies normally charge the same price. The smaller firms follow the leader: they change their prices when the market leader’s prices change, rather than when their own demand or cost changes. If you have read this far, you are probably ready to engage a pricing strategy marketing consultant. Remember, "Procrastination is the thief of time" and the sooner you act, the sooner you'll achieve your goals! My initial blog on pricing strategy, ‘How To Set Prices To Seriously Increase Profit,’ was written to identify pricing as an under-utilized tool to drive your company’s bottom line. While there is recognition that market focused options are more effective in building longer-term profitability,  >80 per cent of companies continue to price their products or services primarily on the basis of costs or competitive prices.

With Customer Based Pricing (sometimes referred to as Value Based Pricing), the seller makes decisions based on the estimated value of the product or service from the customer’s perspective.
Well, let’s be honest, we’ll never know exactly what a given customer is willing to pay, but we can use experience and research to estimate what they are prepared to pay.
Experience – If you’ve been doing this for a while, you’ve gathered a lot of data about your market. The more you are able to apply your experience, the greater your ability to understand your customer’s willingness to pay. Simulation exercises in which customer price sensitivity, competitor reactions and other factors are considered.
As you move into Customer Based Pricing, companies must fully understand the customer, their motivations, and what they value.
However, there are weaknesses to this pricing strategy, both for today’s ‘deal’ and for tomorrow’s ‘relationship’. This approach can alienate those customers who pay more; it can be viewed as discriminatory. Customer Based Pricing can also lead to internal conflict between sales people (especially commissioned sales people) and other groups within the selling organization. Boardroom Metrics Marketing Consultants provide strategy and execution solutions for your inbound and outbound marketing objectives; including social media, branding, pricing and advertising.
Just email us by clicking this button, or fill out this form and a consultant will get back to you ASAP. Following is a table with some guidance on which costs you should consider for different decisions you would like to make. Since pricing is a complex issue for many organizations, I decided to write a series of posts regarding different types of pricing strategies, moving along a continuum from the simple to the more complex. Since this will likely result in variable pricing by customer or customer segment, this approach should deliver the maximum amount a company can charge for its product or service.
In addition to tracking a variety of inputs, you’ve likely segmented the market by product, customer and competitor.

How will they use the product, how do they segment their business, is this a strategic purchase or merely a tactical buy? If your customer suspects price discrimination, he will become more aggressive to secure a lower price. A buyer who understands that pricing will be set on perceived willingness to pay has no incentive to appear attracted to the sellers product or value proposal.
For example, in situations where there is aggressive negotiation, the salesperson may be inclined to offset the volume risk through price concessions. While willingness to pay will differ between customers, it may also differ within the same customer in diverse situations…. While this approach will theoretically maximize volume and profit, it’s important to develop and resource an ongoing process to gather, interpret and apply data.
If you have a specific issue or question related to my expertise I am happy to share my thoughts with you.
Value based segmentation techniques talks about defining segmentation based on value placed by customers on the product. Is it a component of a commodity product they make, or a small element of a value added item they produce?
Simply fill out the information below including when you would like to talk and we will make it happen. They may withhold important information, appear negative and comparison shop more aggressively. The selling organization needs to be committed to Customer Based Pricing, including the principle of ongoing research. This kind of negotiation leads to a transactional approach versus the development of a long-term partnership.

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