The Value Law of Business Physics

The Value Law of Business Physics

We have a number of Laws of Business Physics that we often share with our clients. These “laws” are modeled after Newton’s laws of physics. 

We thought that you might enjoy learning about one; The Value Law of Business Physics.

The Value Law of Business Physics states that every change in value delivered has an equal and identical reaction in price (and vice versa). In other words, when we change the amount of benefits delivered to a customer there should be a corresponding change in the price.  While this is a simple and logical principle, we see companies frequently adding more benefits to their customers without charging any additional price. This typically occurs with legacy customers where frequent requests are made to enhance the delivered goods. For instance, adding packaging materials, small product modifications or expedited delivery requirements. Often, we are eager to satisfy the customer’s request but we are hesitant to increase price. Over time, these products suffer from lower than projected profit margins.

When customers ask for added benefits be sure to add a corresponding price. Most often, customers are willing to pay a little more to get their product in a way that better suits their needs.  

Pricing those products according to the value customers are willing to pay for is known as a value based pricing strategy.  To learn more about how you can stop price leaks and implement your own value based picing strategies contact a Price Point Partners pricing consultant. They can perform a pricing analysis on a sample of your current pricing data and determine the best strategy to increase your profit margins back to projected levels and higher.  Contact a pricing expert today at 330-342-0923, or fill out this contact form and a pricing consultant will be in touch.

 

About the Author
Ralph

Ralph Zuponcic

President, Price Point Partners

Ralph is a national authority on strategic pricing. He has been featured in publications including The Wall Street Journal, Fortune Small Business, CFO Magazine and Marketing News.

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