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Pricing on Purpose

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Pricing on Purpose

Creating and Capturing Value


15 min read
10 take-aways
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What's inside?

How to create and capture more value by pricing your product carefully – just let your customers pay you more.

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Ronald J. Baker makes a sound economic case that the traditional method of generating prices by calculating costs and figuring in an acceptable profit is outdated and unsuitable for today’s knowledge-based business world. Price differentiation and value-based costing have been around for a while, but Baker’s explanation is useful and nicely written. He explains how different customers will value your product their own way, and how to use that differentiation to make money. In 22 concise chapters, he shows you how to understand your customers better and how to create value that they will buy. By capturing a share of that value you earn profits. Baker has a knack for explaining economic concepts in plain English rather than abstruse textbook jargon – and that’s valuable, right there. Get it, read it, use it and make more money. getAbstract recommends it in particular to marketing and product management professionals (or anyone who is interested in the subject of pricing).


The Reasons for Business

Why is movie theater popcorn so expensive? It’s because the refreshment stand is really a form of customer segmentation that allows those who value snacking as they watch a movie to pay for that experience. Those who just want to see a movie will still purchase tickets, but not buy popcorn. In the same way, your job is to understand what your customers actually want you to provide, be it movies, popcorn or both. You need to know what they want, why you are in business and how you can create value for your customers while capturing a hefty portion of that value as profit. The profit you achieve is a trailing indicator of the value your customers place on your offerings and of your skill in capturing a portion of that value.

Your organization’s worth resides more in the minds of its people and its relationships with suppliers and customers than in its tangible, balance sheet assets. Your goal is to develop, manage and use all three forms of that intellectual capital – human capital, structural capital and social capital – to capture benefits and profits for your business. Andrew Carnegie once said that if you took away his factories and hard ...

About the Author

Ron Baker also wrote the bestselling Professional’s Guide to Value Pricing. He teaches value-pricing to businesspeople worldwide.

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