_____-based pricing is used when there are a small number of large service providers.

Q: What is meant by Value

I like to use this definition: Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor.”

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What is customer based pricing?
When should you use Value
What is meant by Value
What is cost based pricing strategy?

Proposed definitions will be considered for inclusion in the Economictimes.com

Marketing

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Pricing Options
Apart from the four basic pricing strategies -- premium, skimming, economy or value and penetration -- there can be several other variations on these.

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Product
A product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual or cyber form.
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Definition: Price is the value that is put to a product or service and is the result of a complex set of calculations, research and understanding and risk taking ability. A pricing strategy takes into account segments, ability to pay, market conditions, competitor actions, trade margins and input costs, amongst others. It is targeted at the defined customers and against competitors.

Description: There are several pricing strategies:

Premium pricing: high price is used as a defining criterion. Such pricing strategies work in segments and industries where a strong competitive advantage exists for the company. Example: Porche in cars and Gillette in blades.

Penetration pricing: price is set artificially low to gain market share quickly. This is done when a new product is being launched. It is understood that prices will be raised once the promotion period is over and market share objectives are achieved. Example: Mobile phone rates in India; housing loans etc.

Economy pricing: no-frills price. Margins are wafer thin; overheads like marketing and advertising costs are very low. Targets the mass market and high market share. Example: Friendly wash detergents; Nirma; local tea producers.

Skimming strategy: high price is charged for a product till such time as competitors allow after which prices can be dropped. The idea is to recover maximum money before the product or segment attracts more competitors who will lower profits for all concerned. Example: the earliest prices for mobile phones, VCRs and other electronic items where a few players ruled attracted lower cost Asian players.

These are the four basic strategies, variations of which are used in the industry.

PREV DEFINITION
Pricing Options
Apart from the four basic pricing strategies -- premium, skimming, economy or value and penetration -- there can be several other variations on these.
Read More
NEXT DEFINITION
Product
A product is the item offered for sale. A product can be a service or an item. It can be physical or in virtual or cyber form.
Read More

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What is customer based pricing?

Value-based pricing, also known as customer-based pricing, is a pricing concept which is defined as follows: The setting of a product's price based on the benefits it provides to consumers. In other words, it is about finding the price that your customers are willing to pay.

When should you use Value

Value-based pricing is a pricing strategy used by businesses to charge products and services at a rate they believe consumers are willing to pay. As opposed to calculating production costs and applying a standard markup, businesses instead gauge the perceived value to the customer and charge accordingly.

What is meant by Value

I like to use this definition: “Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor.”

What is cost based pricing strategy?

In a nutshell, cost based pricing is a pricing strategy in which a company adds a markup to the price of a product over the cost of production and manufacturing. The strategy often involves adding a fixed percentage added on top of production costs for one unit.