What is “Value-Based Pricing”?

Value-based pricing is a pricing strategy that determines the price of a product or service based on the customer’s perceived value rather than the actual cost to produce it. This approach focuses on understanding the target market’s needs, preferences, and willingness to pay, and pricing accordingly to reflect that perceived worth.

Example

"The SaaS company used value-based pricing to charge premium rates, knowing users viewed its automation tools as critical to business success."

How is “Value-Based Pricing” Used in Business?

In business, value-based pricing is commonly used for premium products, SaaS tools, and services that deliver measurable outcomes. Marketers and product managers analyze customer feedback, market demand, and competitor value propositions to position and price their offerings for maximum perceived benefit.

Pro Tip

Effective value-based pricing requires deep insight into your customers’ problems and how your product solves them. Invest in customer research and align features with what users truly value.

Related Terms

Psychological Pricing, Price Elasticity, Customer Lifetime Value, Premium Pricing