Price is the ultimate test of value. Amalgam cannot emphasis this enough. No matter how valuable you think your product or service is, the ultimate business test of that value is whether someone is willing to buy it at the listed price.
One of my favorite topics in enterprise software is pricing. Despite the work done in value-based pricing over the past 50 years, the vast majority of pricing exercises still start with either a very basic cost-plus or percentage-based ROI model. This assumption has a key issue: it assumes that your product is a commodity. To explain why and to explain how to take a more value-based approach, consider what a price is.
There are many ways to break down price and many roles that price plays from a marketing and sales perspective. But as a starting point, the model AI uses to translate value into price comes from 3 basic components: Reference Price, Differentiated Value, and Price Positioning
Continue reading “Amalgam Insights’ primer on value-based pricing”