Value Based Pricing - The free movie ticket that no one took

7 min read

How Tom Cruise's latest top gun movie : Top gun maverick helped me answer the question what is value based pricing. Read on for a fun little incident.

Value based pricing is a strategy of pricing a product or service primarily based on the customer's perceived value of the product. This pricing strategy focuses on how a customer values a product or service rather than what it costs or what a competitor sells a similar product or service for. In a nutshell, Value Based Pricing approach uses buyers' perceptions of what a product is worth as the key to pricing.

Here's a small story from today that explains value based pricing very well. Our family friend Aunt Maggie is visiting us and she proposed to watch the movie Top Gun Maverick, post work today. We decided on a dinner and a movie at mall midway from work and home. 

But as luck would have it, my wife forgot that we were to dine together before the movie and she ate at home with Aunt Maggie. So I decided to just have my favourite Kampong chicken fried rice at the cinemas. 

While in queue to get my meal, 2 ladies came up and asked all of us in queue, if someone wanted a free ticket to the best seats as one of their friends could not turn up due to illness. Although, the ticket was free and for better seats, no one took it.

This got me thinking how this demonstrated what value based pricing means. As folks who usually watch movies, go with friends or family, no one wanted to upgrade as the  value is not so much in which seat to watch the movie in, but with whom you watch it . Even a better free ticket did not get people to take it.

Therefore, to optimise your profits, it is important to understand who your customers are and how they value your good or service. As a simple rule of thumb, the highest price that you can sell for is what value the customer perceives your product for and the lowest price is what it costs you.

Pricing is a process, and knowing your customer is one of the most important aspects of the process. Konigle helps you better understand customers and automate a lot of pricing tasks to optimise your profits.

Sign up now to start using Konigle to manage your pricing. And yes, Top Gun Maverick is good movie, must watch.

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