Value/Prestige

Pricing Methods

• • Penetration Pricing

  • Price Skimming

  • Competitive Pricing

  • High-Low Pricing

  • Freemium Pricing

• Value-Based Pricing

  • Cost-Based Pricing

  • Simple Mark-Up

  • Contribution Margin

  • Simple Prime Costs

Value-Based/Prestige Pricing

Most value-based methods and approaches will focus primarily on the price-premium angle…where a prospect will actually pay more money because they understand the value of a certain feature, function, or benefit, relative to competitive offerings. Obviously, this is a very important angle because it has significant profitability implications.

Value-Based

A value-based pricing strategy is when companies price their products or services based on:

• • What the customer is willing to pay

  • Value or perceived value created for/by customers (Gucci, Supreme, Victoria Secrets, Mercedes)

If used accurately, value-based pricing can boost your customer sentiment and loyalty. It can also help you prioritize your customers in other facets of your business, like marketing and service. On the flip side, value-based pricing requires you to constantly be in tune with your various customer profiles and buyer personas and possibly vary your prices where your customers vary.

Prestige Pricing

When companies price their products high to present the image that their products are high-value, luxury, or premium. Prestige pricing focuses on the perceived value of a product rather than the actual value or production cost.

Prestige pricing is a direct function of brand awareness and brand perception. Brands who apply this pricing method are known for providing value and status through their products — which is why they’re priced higher than other competitors. Fashion and technology are often priced using this strategy because they can be marketed as luxurious, exclusive, and rare.

Read this article about Hawaiian Airlines and their response to the No-Frills Southwest Airlines entering into Hawaii: Hawaiian Airlines going Premium over Penetration Pricing Southwest Airlines

Four steps to value pricing and being able to charge a premium:

• 1. Understand your client's desired outcome

  2. Frame the conversation about quality and price

  3. Explain how your product's features help reach the client's desired outcome and your unique selling position

  4. 'Paint a picture' of what happens if your client doesn't use your service

"Stop Looking at the Ground for pennies, When Dollars could be Flying By" ~ Unknown

Think About It: Value Pricing

• • What is difficult about value pricing?

  • What is difficult about prestige pricing?

  • Why is value pricing and prestige pricing important for a business?

• • https://www.bdc.ca/en/articles-tools/marketing-sales-export/marketing/pages/pricing-5-common-strategies.aspx

  • https://blog.hubspot.com/sales/pricing-strategy

  • https://www.investopedia.com/terms/v/valuebasedpricing.asp

  • https://www.pricingbrew.com/insights/value-based-pricing-premium-vs-preference/

  • https://www.seattletimes.com/life/travel/airlines-in-hawaii-price-war-offer-9-inter-island-flights/

  • https://www.webstaurantstore.com/article/129/restaurant-menu-pricing.html