Capacity and value based pricing model for professional services

The capacity and value–based pricing (CVBP) model for professional services was derived out of a need for a new way to think about how professional service ‘products’ should be priced in a competitive marketplace. Moving away from ‘cost–plus’ pricing, the CVBP model attempts to incorporate the ‘stand–alone’ value of a service, along with other variables, to arrive, systematically, at a set of improving prices. A multinomial logit model is used to model the discrete choice decision making. The model and its output can be used in negotiating services contracts, increasing profits, and smoothing demand.