Question

Name and describe the two types of value-based pricing methods.

Provide an example of a product that you believe is priced based on each of strategies and explain why you believe this.

*** this is a Marketing class***

Answer 1

To understand the value-based pricing method following are the two major types of value-based methods.

1. Good-value pricing: many companies which have costly brands decide to bring an economy version of their established brand, this economy version of products offers similar quality of the product as well as service but comparatively at a lower price (more fair price). it is also possible to give better products with improved quality at a similar price. An example of such price is new facelift versions of automobiles which are upgraded from the previous version of the car but are made available at a similar price or marginally higher price. The price increase is well justified for improvement in quality and service.

2. Value-added pricing: Many companies adopt this strategy to fight with the competition without entering into the price war with its competitors. Companies do not reduce the price which might lead to erosion of brand value, rather they add on value-based products and services along with the main product and establishes the justification for their higher pricing with respect to competition.

An example of such pricing is the offering of the extended warranty period and 3-5 years of free service along with a new car without lowering the actual price of the car for the customers. Customers also find such value addition as well justification of price as they are getting more value out of it.  

Therefore, I believe these pricing methods helps brands to get similar revenue and for customers its a better value deal and creates win-win for both.