How do you determine how much to charge for a product? Figuring out how much somebody’s willing to pay for a product seems like a really simple question, but in practice, it’s not that easy.
The problem with asking people what they’re willing to pay is you have to ask them at the exact moment when they are ready and able and motivated enough to give you an answer.
By value-based pricing. I always charge what a customer is willing to pay. If you think about it, that’s perfect pricing. It’s not possible to get a price higher than what a customer’s willingness to pay. If I could always charge whatever any customer is willing to pay.
“The most profitable pricing decision really is to adopt value-based pricing.”
– Mark Stiving
I have absolutely maximized the amount of revenue and profit that I can get for my company. By now you figured out that that’s not really possible. I can’t read somebody’s mind. I don’t know how much they’re going to be willing to pay me. But instead of thinking about this as, ‘Oh, we have to be perfect at value-based pricing.’
Let’s accept it as a goal or as an attitude. And when we think about doing price execution and the daily tasks that we do, or the strategies we create in every decision that execution should be all about, how do we get closer to this idea of charging? What a customer is willing to pay. And that is the most profitable pricing decision you can make.
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