Article at a glance:

Setting value, not price

Value pricing is frequently misunderstood as a synonym for low prices, but it more accurately describes the trade-off between the benefits a customer receives from a product and its price. Striking the right balance requires careful attention to the details of pricing. Too often, however, marketers fail to invest adequately in understanding the customer's interests. Even when they do, they overlook the reactions by the competition and the ways they should respond.

The take-away

Marketers should take a more disciplined approach to setting prices, especially on newly introduced offers. Plotting the perceived benefits to customers against the cost of a product sheds light on its proper competitive price.