Pricing Model Strategy

A pricing model strategy establishes the “best price” for a product or service. The objective is to determine and maximize profits and shareholder value while correlating with market demand. Materializing the plan enables the differentiation of various pricing methodologies across distinct market segments. The outcome should pinpoint higher profitability targets, create significant competitive pressures, and impact a company’s approach to pricing.

The results are critical to advancing profitability, growing customer interest, and increasing revenues. In a recent Mckinsey study, “1 percent change in pricing could result in an 8.6 percent change in profitability.” Although customers’ perspectives are relevant to the price that justifies value, low pricing indicates low quality and less value. Customers often associate less expensive products or services with the word “Cheap.” The value-based price strategy is to sell at higher prices to ensure proper margins. The process requires a unique perception of the value of goods or services to determine the equilibrium between customers’ perspectives and willingness to purchase.