Impact Pricing by Mark Stiving is a well written, easy to read guide for businesses trying to decide what prices to set for their products or services. Dr. Stiving demonstrates that despite pricing being one the key factors in business success or failure, many companies have no clear strategy for setting prices.
The author points out that most companies simply use a “Cost Plus” method for determining what prices to charge. The company calculates how much it costs to make its product, adds the profit margin it would like to receive and that equals the price.
Impact Pricing notes that this old fashioned Cost Plus method makes no sense. The only thing that matters is how much the product is worth to the customer. Mark Stiving advocates what he calls “Value Based Pricing.” After all, the customers really don’t care how much it costs a company to make a product. What they care about is the value of the product to them.
Of course, trying to figure out what the value is to a customer is easier said than done. Much of the book describes in detail various methodologies to do just that. Continue reading