Value, like beauty is in the eye of the beholder

It's a truism that the same thing will be worth more to some than to others.

For individuals the value of something will also change depending on their circumstances. A glass of water is worth much more if you are lost in the desert than if you are sitting at home watching tv.

Despite this most products and services we buy are a standard price. There might be regional variations but broadly the price is uniform. That makes sense for 'commodity' products and services where there are multiple units and each one is identical or very similar.

Where products and services are unique there is an opportunity for businesses to be more flexible with their pricing. 'Value pricing' is nothing new and there has been and still is much research and debate on how businesses can do this effectively.

The Wikipedia definition of value pricing is, 'Value-based price is a pricing strategy which sets prices primarily, but not exclusively, according to the perceived or estimated value of a product or service to the customer rather than according to the cost of the product or historical prices'.

I like this definition and the key phrase is pricing based on, 'the perceived value...to the customer'. How many of us do this in business? Surprisingly few I think.

Surprisingly, because the thing about value pricing is that both the seller and the buyer end up happy. The seller because they have maximised their selling price and the buyer because they have purchased something at a fair value to them.

One area where value pricing comes into play and has been exercising me recently is selling a business. Value here can vary tremendously between each prospective buyer. Some may see synergies with their existing business or opportunities for improvement that may not be apparent to other prospective buyers.

So the 'game' for the seller and their representatives here is to find out where the prospective buyer's value threshold is. There is an old saying in business, 'How much money did you leave on the table?'. For many sellers it can be quite a lot.

A seller may be pleasantly surprised at an initial offer and be tempted to accept. In most cases though, this is a time to step back and reflect. Put yourself in the buyer's shoes and think hard about what the real value is to them. This could mean that you leave less money on the table and both you and the seller achieve a good outcome. That is worth some time and mental effort I think.

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