Market-Value Pricing Charge what your product is worth ... The right price for most products is something near the product's true value. Charge too much above that fair price and you will drive away many customers and antagonize those who stick with you. Charge too little, your profit margins will suffer and you force competitors to retaliate. With Market-Value Pricing, the aim is to set prices knowing the worth of the product. ... but what is your product really worth? Your customers have alternatives. You may truly believe that your product is worth a million dollars, but your customers will think twice about spending a million if the competition is charging half that. So the first lesson of market-value pricing is that the worth of a product is determined by your customers as they compare your product to alternatives on the market. If the perceived performance of your product is only average for your category, then the product is worth no more (and no less) than the average price. However, if your product has identifiable competitive advantages, then customers should be willing to pay a premium. How much of a premium depends on how big the performance advantage is. Performance advantages can be measured using customer value accounting, and the resulting measures can be used to calibrate the worth of the product relative to competitive alternatives. Measure the performance of your product against the competition Product performance has many dimensions. Competing brands of physical products may differ in terms of such tangible characteristics as power, features, quality, reliability, safety, and ergonomics. Competing service products have different performance characteristics that can be measured. Even in the purchase of physical products, customers will evaluate the services (e.g. technical support, delivery, responsiveness), and personal relationships associated with the products. Every product category is different, but any product can be described, and measured, in terms of a list of attributes that characterize its performance from the customer perspective. If you know how your product stacks up attribute by attribute, you can evaluate its overall performance and determine an appropriate price. Customer Value, Inc. can help you implement Market-Value Pricing
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