Value‐in‐use Pricing

Abstract

Maintains that, in multi‐product companies, frequently it is the case that decisions taken on the price of one product will have implications for other products in the range. Controversy has frequently centred on the role that costs should play in determining price. Discusses attempts to overcome problems in pricing by use of a marginal cost approach rather than a full cost approach, therefore allowing the pricing decision to become one of attempting to maximize the contribution the product will make — the difference between price and the direct and attributable costs. Posits that product costs become irrelevant to pricing decisions even though they are highly pertinent to the decision's profitability. Examines price as one of the simplest ways of segmenting markets, stating that price segmentation can become far more effective when based on value‐in‐use.