B2Bridge

The 3C pricing model suggests that defining the right price is a difficult balancing exercice that uses three main references.

• Cost - cost shows the minimal price, i.e. if you want to be profitable. Cost can be a tough one to calculate though, since cost can depend on scale of production, effiiciency of production, etc.
• Customer - the value perceived in the eyes of the customer. The more value one adds to the customer, the higher one could price its offering. Value-based pricing aims at this reference, and is seen as both difficult to calculate and difficult to sell/obtain.
• Competition - the price the customer could obtain from the competitor sets a reference framework in the industry. This reference framework obliges a higher price to correspond to a higher value. Lower price is always easier to sell, but then there is value given away.

To my viewpoint, there is one term missing here -- it's a pitty there is no 'C' for this one -- and that is the industry price reference framework. E.g. if you offer a service that is rated per hour, the rate will be compared to other rates clients used to getting from suppliers that reach far beyond the competition. If you address a market in which people are used to getting quotes from management advisors, there will be no surprise for high rates for a junior consultant. However, if the buying centres you are confronted with are used to working with labor workers for less than 30€ an hour, the same junior consultant rate will be unacceptable -- even if you offer great value to the customers, and even if the competitor asks a similar price than you do.