Why the Highest Price Isnt the Best Price Harvard Case Solution & Analysis

Many suppliers serving business markets believe that practicing value-based pricing means to find out what the value of their proposals for alternatives to their customers, and then charging a high price as they can. But the authors suggest that "charging what the market will bear" is not always the right strategy. Instead, they argue that the organization must adapt their prices to a more robust market strategy. "Unfortunately," the authors say, "when stripped of jargon and words said market strategy "for many companies simply sell more!" To combat this problem the authors propose a few questions that the organization should ask in order to improve their pricing strategy, including: What is a marketing strategy in this segment? What is the differential value that is transparent to the target customers? What is the price of the next best alternative suggestion? What is the expectation of consumers in the "fair" price? By asking these questions and more, the organization can choose a price that provides the greatest long-term value for the provider. Advantages of this approach include improved customer relationships, which often lead to long-term, more profitable relationships. Using this approach, customers are also more willing to work with suppliers that can lead to shared data and improved products. According to the authors, vendors that practice such a value-based pricing to increase profits, not only in the present, but also to put yourself in profit in the long term. "Hide
by James C. Anderson, Mark Waters, Wouter Van Rossum Source: MIT Sloan Management Review 10 pages. Publication Date: January 1, 2010. Prod. #: SMR341-PDF-ENG

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