Price Setting
The Price Setting tool answers two vital strategic questions about a value model: 1) how much your customers are willing to pay for your company’s offering, and 2) how much profit you will make selling at that price．Price Setting allows you to:
- Analyze your customer’s key price sensitivity factors, such as switching costs, risk perception or brand image
- Calculate contribution and operating margins based on a calculated price and offering cost
- Model the impact of sales volume on profitability
- Predict amount in sales volume gain required to break even when considering a price cut for your offer
The calculated price can then be used in the Value Communication tool to create marketing collateral and sales guides.
How it works
- Pricing Factors: Select one or more customer sensitivity factors and rate their impact on the customer’s purchasing decision to show the influence on the offering price.
- Margin Analysis: Enter projected sales volume of your offering, as well as variable and fixed costs, to show the impact on contribution and operating margins.
- Break-Even Sales Change: Calculate the impact of a price change on volume, specifically, the percent change in sales volume required to break even.
Avoid Discounting Using
Value-Based Pricing.
Ask the Expert
Tom Nagle, author and
strategic pricing expert,
answers your pricing questions.
Click here to read Tom's past advice, or email AskTom@leveragepoint.com to ask a question of your own.
