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Maximize profits with Value-Based Pricing

Maximize profits with Value-Based Pricing
by Florian Geiger

Maximize profits with Value-Based Pricing

In industry pricing is often strongly oriented towards internal cost structure and competitors‘ pricing. With our customer value-oriented approach (Value Based Pricing) you unlock potential and increase your profits.

Value-Based Pricing: higher prices for more customer value

In setting prices, existing competitive advantages are often ignored and the actual value to the customer is underestimated. Usually cost reduction potentials are already exhausted during product development and during the optimization of ongoing production.

In contrast the effect of pricing on profit margins is erroneously underestimated. But customer value-oriented pricing markups using Value-Based Pricing can contribute to profit growth. The objective value of a product determines the price sensitivity of the customer, and the willingness of each customer to pay, depends on its individual situation. With Value-Based Pricing a customer-neutral Value Based Price and a customer-tailored surcharge factor are determined.

Value Based Pricing ENG L - Maximize profits with Value-Based Pricing

Value-Based Pricing tailored

The optimal pricing and financial evaluation of customer value always require an individual approach. Our Sales & Marketing experts who are experienced in both consulting and industry management tailor each Value-Based Pricing Project exactly to your requirements and individual circumstances. The respective value of a product is determined by us, with the support of your industry experts, using multi-dimensional, weighted evaluation criteria. With the help of price functions and using the resulting evaluation factors , individual, value-oriented product prices can be determined. In order to avoid erroneous assessments, the Value-Based Pricing results undergo multiple proof cycles. The evaluations of the products are compared with each other and compared to reference prices. Through our systematic Value-Based Pricing approach with clustering and evaluation automatisms you quickly obtain precise results.

Typical Results from Value-Based Pricing

  • Rapid increase of profit margins by up to 5% points
  • Increased revenues with nearly the same sales quantity (fully utilized margin potential)
  • Optimization of margin by retaining customer satisfaction (focus on customer willingness to pay)
  • Transparent price-setting system
  • Price differentiation based on customer requirements

Value-Based Pricing applied

The service business of a machine manufacturer was more profitably sustained using Value-Based Pricing. Using our systematic process, variations in previous pricing were eliminated and new profit potential was unlocked through the multidimensional pricing structure for all service products. The internal Value-Based Pricing Process was accompanied by well prepared, compelling communications with customers, leading to implementation of price increases and profit margins quickly rose by up to 30%. With the target oriented support of TARGUS the prices of the entire service range of products was reworked in only 3 months and the positive results quickly improved the operating profit.