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Definition: Value of Service Pricing
Value of service pricing is used in business on the basis of derived value of the service by the customer. The main ideology behind this type of pricing is the value perceived by the customer plays major part in the pricing strategy rather than the cost. It is often used in the logistics industry.
If your firm is able to create differentiation in terms of the service/product offered than you can use this type of pricing effectively, if your products are indistinguishable than you cannot price your products based on this strategy.
Take the example of a jeans. If your jeans is a normal fit with other normal features, you are likely to price it on cost plus pricing strategy. On the other hand if your jeans is a custom fit, stretchable jeans with particular definitions you should use value based pricing because of the extra value derived by the customer.
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