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Why Pricing People Can’t Do Value-Based Pricing

As you might imagine, we get a lot of questions about value-based pricing. For the last decade or so, there’s been so much hype around the concept that it now seems like a required pursuit for every self-respecting pricing person.

On one hand, it’s hard to argue that is a bad thing. After all, the benefits and virtues of value-based pricing are certainly worthwhile. But on the other hand, all of the hype has contributed to a host of misconceptions and unrealistic expectations.

To help Journal subscribers gain more clarity on the topic, I recently had the pleasure of interviewing Stephan Liozu, a well-known thought leader in the pricing community and a prolific author on the subject of value-based pricing.

In our hour-long conversation, Exposing the Truth About Value-Based Pricing, Stephan was able to cut through all of the hype, dispel a number of common misconceptions, and clearly describe what the practice of value-based pricing actually entails.

And here’s one nugget that may surprise you: Pricing people can’t actually “do” value-based pricing. At least, they can’t pursue it effectively on their own.

As Stephan makes clear, real value-based pricing is about more than the numbers or the pricing “labels” that are ultimately delivered into the marketplace. To gain the level of customer knowledge and competitive insight necessary to even begin to contemplate the final prices requires lot of homework. And this prerequisite homework is best performed in collaboration with your marketing, product, and sales groups.

While it might be nice, comforting, or even convenient to think of value-based pricing as some sort of panacea that the pricing team can pursue on its own, that’s just not realistic. As Stephan says early on in our discussion, “Value-based pricing is much more than a pricing strategy. It’s a go-to-market strategy.” And an effective go-to-market strategy simply cannot be developed in isolation, by one functional silo.

So if you’re thinking about pursuing value-based pricing…or wondering why your current value-based pricing efforts aren’t getting anywhere…I encourage you to listen to Stephan’s interview. It may not be the sunshine and roses you’re hoping to hear about, but it is the truth.

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