57. Value-based pricing: a framework

Drawing from extensive research, this entry proposes a comprehensive framework for value-based pricing strategy development and implementation. It underscores the centrality of understanding: (1) the customer dimension, comprising customer value analysis (i.e. the analysis of customer maximum willingness to pay), estimation of the price-response function (i.e. price elasticity), and analysis of customer price perceptions (i.e. analysis of psychological aspects of pricing); (2) the competitive dimension (i.e. price levels and competitive advantages of competitors); (3) costs; and (4) distribution channels in shaping profitable pricing ranges. Additionally, it highlights the significance of internal alignment and external negotiation for effective strategy execution.