Sometimes, companies tend to take advantage of Value-Based Pricing It's due to the inequality between the demand and supply of such products that the companies can charge exceptionally high prices without affecting the volume of sales. However, in Value-based pricing, the selling price does not have much of an impact on the volume of items sold. Normally, when the prices increase, the volume comes down. How Does Value-Based Pricing Affect Sales Volume? Since there is an emotional value attached to it, the second-hand bikes of Yamaha RX-100 are still in demand and bike-lovers pay a premium price to own an RX-100. Yamaha RX-100 was a popular bike model in India and it is still a favorite among bike-lovers, but unfortunately, the company is no longer producing this model. Let's take an example to understand this scenario. The pricing in such cases is derived from theĮmotional value that the buyer attaches to such products. Sometimes famous paintings sellįor millions in auctions. People sometimes pay exorbitantly higher prices for costumes designedīy famous and renowned designers. In this case, the perceived value of the stamp is much more than its actual value. Suppose Samsung comes up with a new 5G enabled smartphone with an all-new feature that is not available in other smartphones, then this new product can command a much higher price based on its novelty factor.Ī collector of postal stamps would not hesitate to pay a premium priceįor a stamp that is rare.

The difference in price, in this case, is due to high demand of popcorn and its limited supply. You would get the same bucket of popcorn at half the price, outside the multiplex. Imagine how much you pay for a bucket of popcorn inside a multiplex. Then, a person who is an admirer of this watch brand would be ready to pay a premium price to own a piece from the designer collection. The company will produce only 1000 such pieces. Following is a list of situations where Value-Based Pricing can be effective −įor example, if a reputed watch maker comes up with a designer collection to mark its centenary. Not every product or service can command a premium price. If we have to define Value-based pricing, then ' it's a pricing strategy to calculate the selling price of an item or a service based on its perceived value rather than its actual value.' Examples of Value-Based Pricing In Value-based Pricing, a company can charge a significantly higher price for a product or service, and the pricing is completely independent of the manufacturing cost. Value based pricing is completely different from this scenario. In such cases, the price difference between the products do not vary much, because even the premium brand cannot increase its selling price in a disproportionate manner as it would significantly impact the sales volumes. There's a brand value attached to products that belong to a superior brand. We very well understand that a superior brand can charge slightly more for a product than a less-known company that produces the same product, which is the usual case. This is what we call Cost-Plus Pricing strategy where the price of a product is proportional to the manufacturing cost. In general, companies calculate the selling price of a product or service based on the costs incurred in manufacturing that product or delivering that service.