Posted in Marketing and Strategy Terms, Total Reads: 715
Definition: Value Oriented Pricing
The setting of a price for a product or a service, based on the utilities it provides to customers. Such a pricing method is generally used for those products which are highly differentiated from competitor’s products and add considerable value to customers and where the customers are ready to pay for the value added.
There are different types of pricing, out of which one is value based pricing. As can be seen from the picture cost based pricing first takes into account the product and the cost involved in manufacturing it. It is priced accordingly and then only customer aspect is taken into account. But in value based pricing, the value of the product to the customer is first determined and then the price it set for the product to be sold.
Example: The pricing of Apple iPhone can be considered to be value based pricing rather than cost based. Here the high price you pay is for the value you derive from the features of the product and does not reflect the manufacturing cost.