Value-based pricing is a pricing methodology that is used in setting the price to products and services that are consumer based. This strategy helps in ensuring that the price of the commodities being sold is customer based on enabling the customers to afford the products other than setting the price concerning costs of production (Nagle, & Müller, 2017). The price based approach is only applicable when dealing with a certain kind of products that have emotions attached, in most instances, there are emotions attached to the products that they want the consumer to purchase the products. The producer of the products might be complimenting other products produced by the company that it had already sold to its customers.
When setting prices of commodities based on the value-based strategy, the company must also consider the production costs related to the product. If the company fails to consider the production costs, it might end up making loses affecting its operational capacity (Nagle, & Müller, 2017). The company sets the price using the production costs although it does not prioritize making a profit from the sale of the products. Such products have great consumer absorption because in most instances the price is relatively lower than other similar products sold in the market.
Cost based pricing method is a method for pricing products when the company is selling the price to the consumer. The cost-based strategy if focused on setting a price that earns profit to the company (Nagle, & Müller, 2017). The price is set a relatively higher price more than the cost of production in order to earn profit to the company. The company is determined in earning a profit after the product or services are sold. There is a profit range that the company can sell its products to ensure that the consumer is not exploited.
My project company Samsung uses the cost-based pricing strategy to set the price of various commodities that it produces. The prices of the products are set at a competitive price because the company manufactures among the best in quality products (Nagle, & Müller, 2017). This is the best pricing strategy for the company because the company spends a lot of resources in production. Penetration strategy of pricing is where the company set the price lowest for the customers to take advantage of the low price. Skimming strategy is when the company set the price of the company at the highest level in order to reap the maximum price possible.
Nagle, T. T., & Müller, G. (2017). The strategy and tactics of pricing: A guide to growing more profitably. Routledge.