Earlier I had written about two different pricing methods – traditional mark up pricing and perceived value pricing method. Third popular method of pricing is called value pricing.
Value pricing works on simple principles. It assumes that the price of a product should be in coherence with the value delivered by the product to end user. This way, value pricing is different from perceived value pricing. Value pricing is also termed ‘no frills’ pricing. One can visualize value pricing perfectly adopted by no frills airlines, where one pays for being carried from place A to B. No lunch, no water, no freebies. You pay for what you need.
Value pricing can be adopted in a market full of competing products. It is difficult for a small business owner to apply this pricing method for a new product on the market.