Question

Which of the following is true of value-based pricing?

A) In value-based pricing, price is developed around a product's relative strengths to give customers greater benefits than competing products offer.

B) Value-based pricing takes customer needs into account, but fails to consider customers' price sensitivity.

C) Value-based pricing does not consider what customers require from a product in terms of performance and price.

D) The cost of making a product and the desired profit margin are the two primary determinants in setting a value-based price.

E) Value-based pricing is based on features of the product, but fails to consider the prices of similar products in the market.

Answer 1

In value-based pricing, prices are based on the perceived value to the customer and the product's strengths relative to competition. It does take into account customer needs, price sensitivity, and competition, which sets it apart from strategies focused solely on cost or market prices.

Step-by-step explanation:

The concept of value-based pricing is founded on setting product prices based on the perceived or estimated value of a product or service to the customer rather than solely on the cost to produce it or prevailing market prices. Among the given options, A) In value-based pricing, price is developed around a product's relative strengths to give customers greater benefits than competing products offer is true.

Option B is incorrect because value-based pricing does indeed take customers' price sensitivity into account, as the perceived value influences their willingness to pay. Option C is also inaccurate, as value-based pricing heavily relies on understanding customer requirements for performance and price.