Distributors who still use traditional pricing methods like cost-plus and market-based pricing often leave margin on the table. Instead, distributors should update their approach to be value-based. A value-based pricing strategy takes customers’ values and determines price based on what they’ll actually pay to receive that value. It’s a more time-intensive approach at first, but it’s a more sustainable and profitable method of capturing margin.
With this approach, your relationship with your customers will strengthen. Customers who receive the value they desire will be less likely to push back on price, and sales efforts will be more effective with a focus on solving problems and providing value. This approach will also differentiate your company from those that use traditional pricing methods, and you’re likely to capture higher margins when you match value to pricing.
In a recent article for Industrial Distribution, Pradip Krishnadevarajan provides ten steps distributors can take to transform their pricing method to a value-based approach. Following this roadmap will help you implement this new strategy effectively for the best results.
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