Setting value-based prices
Value-based pricing (VBP) is about setting a price to capture the value that a potential customer receives. Here are the steps:
Identify your customer’s second best option. If your customer won’t buy your product or service, then what would he or she choose?
Determine the price of the second best option.
List all of the ways that your offering is better than the second best option. Estimate how much you think these differences are worth to your customers?
List all of the ways that the second best offering is better than yours. Be very honest here. How much do you think these are worth to your customers?
To calculate the best price — take the price of the second best option (step 2 above) plus the value of your advantages (step 3) minus the value of the second best option’s advantages (step 4).