Maximizing pricing is key to unlocking customer value and revenue growth

Organizations today face a significant challenge in maintaining profitable revenue growth. It can be challenging to keep prices aligned with both fluctuating costs and evolving customer perceptions of value, but a structured and strategic approach can help companies get pricing right and grow sales.

In order to overcome challenges in pricing, companies need to think strategically. A white paper from boutique consultancy firm Vesper Commercial Excellence discusses how pricing challenges can impact organizations and how to overcome them.

Challenges in pricing

It is important that companies determine their pricing strategy, and they should go beyond merely making cost-based adjustments focused on inflation or the cost of raw materials.

If pricing fails to evolve alongside changes in consumer behavior and the relevance of the product or service, there is a real risk that organizations may be charging outdated prices for products that lack the value they once had.

The white paper advocates that business leaders should follow a logical series of steps to arrive at the perfect pricing. They must be able to justify price increases based on changes in cost and value. “Prices should be reviewed and updated on a regular basis according to these criteria and in line with targeted segments,” according to Marcel van ‘t Hof, Senior External Advisor with Vesper Commercial Excellence.

In making pricing decisions, organizations can consider five strategic inputs:

First, a value-based offer review involves assessing unique selling points, customer willingness to pay, and overall pricing strategy to ensure prices reflect actual market value, not just internal costs.

Second, comprehensive cost reflection means considering all relevant factors beyond material costs, such as tariffs and logistics expenses. Some companies are transparent about these components and justify price adjustments to their consumers.

Third, product lifecycle pricing recognizes that pricing should change as a product moves through its introduction, growth, maturity, and decline phases.

Fourth, margin analysis involves regularly examining product and customer margins to identify underperforming areas for potential price increases, cost optimization, or strategic repositioning.

Finally, companies should ensure strategic alignment with the prevailing market position. This helps ensure that price levels support the chosen go-to-market strategy, whether it is focused on gaining market share, maximizing profit on innovative offerings, or segmenting the market with differentiated pricing.

This framework offers practical, repeatable steps for routine pricing reviews.

Perceived value and willingness to pay

Gaining a deeper understanding of customers’ willingness to pay is an important part of applying value-based pricing. There is a complex mix of internal and external factors involved in understanding willingness to pay across the different customer segments.

In order to tap into this insight, companies need to try to understand customer perception. That means taking into account many different factors such as the quality of products or services, brand reputation, customization options, availability, customer support, and the quality of customer relationships.

To better understand this, consider the example of Spotify, which decided to raise its subscription fees in 2023. It turns out that customers hardly noticed the change and it resulted in very little churn. That was thanks to the company’s solid understanding of customer satisfaction and market positioning.

Put simply, value-based pricing is a great strategy that can help companies boost revenue, but it is not appropriate for all products and services, and it can be challenging to get right. Companies will be more successful with this strategy if they make use of sales insights and market feedback.

“A key part of successful value-based selling is understanding the unique differentiators of your offerings,” says Jorge Olivares, Senior External Advisor with Vesper Commercial Excellence. “Salespeople must be able to clearly articulate what sets the product or service apart from competitors and explain why it is the right choice for the customer.”

While value-based pricing is one strategy, there are many other pricing strategies. Any approach for optimizing prices might pick and choose from these different strategies.

For example, companies might set prices using a ‘cost-plus’ (mark-up) strategy, but apply competitive pricing (matching the prices set by competitors) for selected products. And additionally implement ‘price skimming’ (start at a high price and adjusts from there) for new high value products, and ‘freemium’ models (offer basic services for free while charging for premium) for their services portfolio.

“Pricing is one of the most powerful – and underused – levers to drive profitable growth,” notes Olivares. “This is particularly relevant for mid-market companies, where every percentage point matters. Even small pricing improvements will deliver a faster and larger impact on profit than cutting costs or increasing sales volume. In short: pricing isn’t just about numbers – it’s a game-changer.”

The white paper from Vesper Commercial Excellence provides a solid framework to guide companies in structuring their pricing strategy and approach in an effective manner.