Value-based pricing sets prices according to how much value customers believe they receive from a product, rather than how much it costs to produce or what competitors charge. This approach focuses on understanding customer needs, pain points, and willingness to pay.
Implementing value pricing requires deep customer research: What problem does the product solve? What is that solution worth to different customer segments? What alternatives exist and how does the product compare? Brands using value pricing often segment customers and offer different versions at different price points.
Many successful DTC brands employ value-based pricing. A $100 everyday carry bag might cost $15 to manufacture, but if customers value its design, functionality, and brand association at $100, that becomes the appropriate price. The focus shifts from cost-plus calculations to capturing the value created for customers.