There are several different interpretations of value-based pricing (VBP), so it’s not straightforward at all, not surprisingly.
Some people will say it’s about fixing a price of a product or service based on the unique benefits of it, but all consumers pay the same price, where others say it’s purely based on providing value to an individual, and then you charge different prices to different people, depending on how much they value it personally, so there's:
1. ‘Market’ value-based pricing where consumers still all pay the same price for the same product.
2. ‘Per person / company’ value-based pricing, where the consumers pay different prices based on what it’s worth to them, in their specific situation.
There are a few others but those are the primary two versions of VBP.
In a nutshell, value-based pricing means determining your fees, not based on what your business costs are plus what you need to earn in order to earn a living; it's about determining the value your client places on your services and what they're willing to pay.
In this way, you set your fees in order to achieve the maximum amount of investment from the customer – with the idea that most customers would be willing to pay more, if they understood the value they could be getting...
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