Legal Tools that Support Value Pricing

Abstract

“Price is what you pay. Value is what you get.”

– Warren Buffett

Value pricing can be a successful means to maximize profit by pricing products and services based on their value to end users. Using this approach necessarily means that customers are segmented, with some receiving better prices than others. However, many companies mistakenly believe that U.S. law requires that all customers receive the same price or a “fair and equitable” price, an unrealistically high standard that is a self-imposed roadblock to value-based differentiation.

Not only is the law supportive of segmentation and the economic discrimination that goes with it, but, where resellers are involved, the law also permits value pricing to be facilitated and preserved through the use of non-price vertical restrictions and resale price setting. In addition, price signaling can be a lawful way to avoid sending wrong messages to the marketplace that jeopardize value pricing strategies.

Citation

Zelek, E.F. (2012), "Legal Tools that Support Value Pricing", Smith, G.E. (Ed.) Visionary Pricing: Reflections and Advances in Honor of Dan Nimer (Advances in Business Marketing and Purchasing, Vol. 19), Emerald Group Publishing Limited, Leeds, pp. 173-194. https://doi.org/10.1108/S1069-0964(2012)0000019014