Definition of Value-based Pricing
This pricing strategy involves making the price of an item or a service what consumers believe the value to be.
Description of Value-based Pricing
Companies often end up with much higher prices, so they make more money as long as they’ve convinced consumers that their item is truly worth that much. Here, the amount it takes to make the item or the current market prices isn’t taken into consideration.
Advantages of Value-based Pricing
This pricing strategy helps businesses increase their revenue by charging the most that they can. Additionally, even though the prices tend to be high, you can make a strong customer base for business in the future as long as the item seems to be worth the price.
Disadvantages of Value-based Pricing
Since your prices are going to be pretty high, you won’t have that large of a target audience and even push away potential ones. This is also mostly beneficial to smaller businesses that focus on something more specific. You’re also going to have so many rivals since it’ll be easy to beat your prices. Additionally, since your item is so great, those who create it or market it will also be just as great and expensive.