Article ID: | iaor2012141 |
Volume: | 11 |
Issue: | 1 |
Start Page Number: | 40 |
End Page Number: | 53 |
Publication Date: | Jan 2012 |
Journal: | Journal of Revenue and Pricing Management |
Authors: | Gale Bradley T, Swire Donald J |
Keywords: | pricing, revenue management |
Pricing specialists agree that businesses should price products based on value. Yet most companies set prices based on the cost of their product. Alternatively, they set prices based on the prices of competing products, without fully accounting for the worth of performance differences between their product and the reference products. They do not have the techniques or tools to appraise their product's value versus other products on the competitive landscape. We illustrate how to appraise a product's value based on the going rate prices of competing products and on its performance versus these comparable products on key purchase criteria that customers assess. We discuss how this benefits business teams by making them more market driven, customer focused and competitor savvy.