Customers and pricing
Value-based pricing
Setting the price from what the product is worth to the customer.
Last reviewedWhat does Value-based pricing mean?
Value-based pricing sets the price from the value the product creates for the customer, such as money saved or earned, and aims to capture a fair share of it while leaving the customer better off. It usually allows a higher price than cost-plus pricing, but needs good evidence of that value.
Where does it come up in case interview prep?
- Revenue models, cost structure, unit economics and operationsLesson in Pharma, biotech and medical devices
- Main players, trends 2024 to 2026, regulation and casesLesson in Pharma, biotech and medical devices
- PricingLesson
- How luxury and fashion make moneyLesson in Luxury and fashion
- How the chemical industry works: commodity and specialtyLesson in Chemicals
- Chemical players, trends 2024 to 2026, and how to crack the casesLesson in Chemicals
- The economics of a consulting firm: hours, rates, realization and pricingLesson in Professional services: consulting, audit, law and IT services
- Professional services players, trends 2024 to 2026, and how to crack the casesLesson in Professional services: consulting, audit, law and IT services
Related terms
- Economic value to the customer (EVC)The most a rational customer should pay, given their next best option.
- Cost-plus pricingPrice = cost plus a fixed markup.
- Price elasticity of demandHow strongly the quantity sold reacts to a change in price.
- TAM, SAM and SOMTotal market, the part you can serve, and the part you can win.
- Market shareOur sales as a share of total market sales.
- Relative market shareOur share divided by the largest competitor's share.
- Penetration rateThe share of potential customers who already use the product.
- Share of walletOur share of what one customer spends in the category.