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"Value Pricing" Should Be Part Of Your Strategy

Participating Solution Provider

"Value Pricing" Should Be Part Of Your Strategy

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In order to be ready for the different colored light that is now visible at the end of the economic tunnel, successful companies must develop the competency for addressing the respective value-for-money behavior for each opportunity that enters their sales funnel.

 

 

 

 

Value For Money Pricing Strategy

In the 1930's P&G and Kellogg's invented the value for money concept. In the 1970s companies such as Intel and Texas Instruments brought this concept to the hi-tech arena with their learning curve pricing strategy.  In essence it says that every time they double cumulative production of an integrated circuit they are able to offer new products with the same functionality, but at half the price. They can also offer new products with twice the functionality at the same price.  This happened every 18 to 24 months, which enabled these companies to continually expand their markets for integrated circuits.

 

These companies continue to develop their product strategies around what they consider to be the three behavioral market segments:

  1. Effectiveness buyers want to do more with the same resources
  2. Efficiency buyers want to do the same with fewer resources
  3. Economizers want to do less with far fewer resources

In the prior economy companies matched the product lifecycle stage with a variety of company-centric pricing strategies such as skimming, penetration, customary, etc. In our new economy all buyers will be driven by one of these three behaviors on an opportunity by opportunity basis, not for all of their purchases.


In order to be ready for the different colored light that is now visible at the end of the economic tunnel, successful companies must develop the competency for addressing the respective value-for-money behavior for each opportunity that enters their sales funnel.

 

By John Bernardi

John J. Bernardi