It’s not a strategy because a strategy (or at least a good one) should explicitly define what you won’t do just as much as it states what you will do. 14: Value-based Pricing: A State of the Art Review Specifically, value pricing can be defined as the practice of pricing to capture a portion of a seller’s economic impact on a target customer’s business.” George Cressman, Handbook of Business-to-Business Marketing, Ch. “ Value pricing then is a cultural orientation that focuses a seller’s business on designing and developing offerings with significant impact on the buyer’s business, then pricing to capture a portion of that impact. I prefer Cressman’s definition of value-based pricing as a pricing orientation. Industry Definitions of Value-based Pricing, Source: Liozu, S. Companies should consider internal costs, competitor pricing, and customer value when determining their pricing and packaging however, a value-based orientation should be primary in your pricing process. It maximizes profit potential and better reflects the overall company goal: creating satisfied customers. Over time, I’ve come to a critical realization that has informed my entire perspective on pricing: value-based pricing is the only orientation that makes sense for a SaaS business. Value-based adoption comes in last, with only 25% of companies citing this as their pricing orientation 1. Customer Value-based (referred to from here simply as value-based)Īlthough the numbers vary slightly over time and industry, in practice, most companies (44%) use competitor-based pricing, while a somewhat smaller percentage (31%) use cost-based.There are three pricing orientations- often known as the ‘Three Cs of Pricing’: 6 In Conclusion Introduction to the Three C’s of SaaS Pricing
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