Which of the following statements are applicable to value-based pricing concept?

A. Design product to deliver desired value at target price
B. Set target price to match customer perceived value
C. Determine costs that can be incurred
D. Convince buyers of product’s value
E. Assess customer needs and value perceptions

Choose the most appropriate answer from the options given below:

Correct option is A

A, B, C and E are correct because these steps are directly aligned with the value-based pricing concept, which focuses on customer perception of value rather than cost-based or competitor-based strategies.

A. Design product to deliver desired value at target price – 
Central to value-based pricing. The product must be designed to offer features and benefits that reflect what the customer values at a price they are willing to pay.

B. Set target price to match customer perceived value – 
Value-based pricing starts by understanding how much value a product or service creates for the customer and then setting the price accordingly.

C. Determine costs that can be incurred – 
After identifying the acceptable price (based on perceived value), firms determine the maximum allowable cost to maintain profitability, working backward from the price.

E. Assess customer needs and value perceptions – 
This is foundational. Without understanding what the customer values, the business cannot define the price or product features.

Information Booster:

• Value-based pricing is a customer-focused approach to pricing that starts by assessing what customers value in a product or service.

• It contrasts with cost-plus pricing, where a company calculates costs first and then adds a markup.

• Companies using this strategy often segment markets to identify different value perceptions and tailor offerings accordingly.

• This pricing method supports innovation, as it encourages firms to create products that meet real customer needs.

• It is prevalent in sectors like healthcare, SaaS, and luxury goods where perceived benefits differ significantly across consumers.

• Requires deep market research, customer interviews, and value modeling to succeed.

• Helps increase profit margins, customer satisfaction, and competitive differentiation.

Additional Knowledge:

​D. Convince buyers of product’s value – This activity falls under promotional strategy or value communication, not pricing methodology. While it's necessary to communicate the value to customers, it doesn't form a part of the core structure of value-based pricing. The pricing is done assuming that customers already perceive the value based on their needs, preferences, and willingness to pay.