Why the Highest Price Isn’t the Best Price Harvard Case Solution & Analysis

Many providers serving business marketplaces consider that practicing value-based pricing means finding out what the worth of their offerings is relative to choices for their customers as they can and charging high a cost. But the writers imply that "charging what the market will bear" isn't always the correct strategy. "Sadly," the authors say, "when stripped of jargon and word-talk the ' 'marketplace strategy' for many companies is only' 'Sell more!'" To counter this problem the authors suggest several questions an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential worth that is certainly transparent to target customers? What's the cost of the next best alternative offering? What exactly is the customer's anticipation of a "reasonable" price? By asking these questions and others, an organization can pick a price point that provides the greatest long term value to the provider.

The benefits of this approach include improved connections with customers that frequently lead to longer-term, more rewarding relationships. Using this approach, customers are also more willing to collaborate with providers, which can lead to improved products and shared data. According to the writers, providers that practice this kind of value-based pricing boost profits not only in the current, but they also set up themselves to gain over the long term.

PUBLICATION DATE: January 15, 2010 PRODUCT #: BH368-HCB-ENG

This is just an excerpt. This case is about FINANCE & ACCOUNTING

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