Cost based pricing vs Value based Pricing

There seems to be a fundamental disconnect in the current business practice that I have been observing, especially in e-commerce business managers. I realized that many of the ecommerce directors that I talk with would set prices just based on cost mark ups. Simple & effective in normal business condition. When I dig deeper about the financial performance and boardroom talks, I hear all the time that board is very demanding and crushing me (CEO) over the margins.

The foundation based on which pricing should be set is probably the one that displays value within the context of getting transacted via a customer. That is the essence of value based pricing.

While I am simply against the draconian way of increasing prices across the board, however, there are always opportunities that exist where prices can be increased within the context of buying.

Let me elaborate a little more on context of buying. If you are New York, at very first hint of rain, you can see that the prices of umbrella have been increased significantly. The street vendors in NY learned about the context properly and made improvements towards end goal of their business, which is to make profit.

The point is the external environment created some stimuli which was interpreted by the seller and thereby increased the prices. Way to go :) . Within e-commerce context, I firmly believe that you can use the technology, big data to identify stimuli for external environment to make adjustment that fully captures the value. We at liftsuggest are in process of building such products that helps to identify that stimulus that helps you capture and display full value of your products within the context of customers’ transaction on website. Please keep in touch and I’d love to hear your thoughts on it.

Ravi Pathak

Ravi Pathak

Ravi (@ravipathak) leads customer acquisition for Price Discovery Platform. He has extensive experience in Conversion Optimization and Data Analytics. Prior to LiftSuggest, he has worked in equity research and portfolio optimization. He is passionate about Data Analytics & Behavioral economics which is an intersection of economics & psychology. Ravi holds an MBA from the BK School of Management, Ahmedabad. Google Plus Profile: Ravi Pathak

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Ravi Pathak

About Ravi Pathak

Ravi (@ravipathak) leads customer acquisition for Price Discovery Platform. He has extensive experience in Conversion Optimization and Data Analytics. Prior to LiftSuggest, he has worked in equity research and portfolio optimization. He is passionate about Data Analytics & Behavioral economics which is an intersection of economics & psychology. Ravi holds an MBA from the BK School of Management, Ahmedabad. Google Plus Profile: Ravi Pathak