Values Based Pricing
Utpal Dholakia writes a piece for the Harvard Business Review (HBR) about how to simply calculate the price of merchandise utilizing a Values Based Model. Utpal explains that many of his MBA students have the hardest time grasping the concept of Value Based Pricing, he proceed to break it down into 1 simple sentence. He uses a simple 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.” (Dholakia, 2016) Utpal’s thesis is that many companies who fail to utilize the Values Based Model tend to leave money on the table when it comes to pricing their merchandise. Utilizing a cost based model fails to capture what the proper economic pricing is because it does not account for supply and demand rather cost and profit balance sheets. Utilizing the Values Based Method a company can properly adjust their pricing to varying market conditions maintaining profits when the timing is there and protecting themselves from losses when the timing is not, identifying the cost and demand price is essential to maintain proper production flows and …show more content…
Utpal does a fantastic job of bringing in relevant information to his audience and making the information easy to understand and clear. He also spends a later part of the article explaining some common pitfalls that people can avoid when looking to establish a Value Based Model for their product. Although this can be a complex analysis, Utpal makes it very clear in his writing in such a way that any layman should be able to understand some of the basic principles of this complex model. I would highly recommend this short and informative article for anyone interested in understanding the market and market pricing
Utpal Dholakia writes a piece for the Harvard Business Review (HBR) about how to simply calculate the price of merchandise utilizing a Values Based Model. Utpal explains that many of his MBA students have the hardest time grasping the concept of Value Based Pricing, he proceed to break it down into 1 simple sentence. He uses a simple 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.” (Dholakia, 2016) Utpal’s thesis is that many companies who fail to utilize the Values Based Model tend to leave money on the table when it comes to pricing their merchandise. Utilizing a cost based model fails to capture what the proper economic pricing is because it does not account for supply and demand rather cost and profit balance sheets. Utilizing the Values Based Method a company can properly adjust their pricing to varying market conditions maintaining profits when the timing is there and protecting themselves from losses when the timing is not, identifying the cost and demand price is essential to maintain proper production flows and …show more content…
Utpal does a fantastic job of bringing in relevant information to his audience and making the information easy to understand and clear. He also spends a later part of the article explaining some common pitfalls that people can avoid when looking to establish a Value Based Model for their product. Although this can be a complex analysis, Utpal makes it very clear in his writing in such a way that any layman should be able to understand some of the basic principles of this complex model. I would highly recommend this short and informative article for anyone interested in understanding the market and market pricing