Value-based pricing: Value-based pricing sets a price from what the work is worth to the buyer, such as the speed, risk or effort it saves them, rather than only from what it costs to make.
Two buyers can order the same part for very different reasons. One is stocking spares and can wait a month. The other has a production line stopped until the part arrives. The cost to make it is identical; its value to each buyer is not. Value-based pricing charges for that difference.
In custom manufacturing, pure value pricing is rare, because every job is different and buyers compare quotes. What shops usually do is start from cost-plus pricing and adjust for value in specific places:
- speed: an expedite fee for faster delivery;
- risk: a premium for tight tolerances or unusual materials;
- convenience: a higher price for one-off orders through an instant quote that saves the buyer an afternoon of e-mails.
Example: a shop’s cost-plus price for a part is €80 with a 7-day lead time. Next-day delivery for the same part is priced at €160. The cost difference is perhaps an hour of overtime; the price difference reflects what next-day delivery is worth.
The common misunderstanding is that value pricing means charging whatever you can get away with. It works best when the extra value is visible to the buyer and they can choose a cheaper option. Your win rate on each option shows whether you have judged the value well. Read lead time pricing for a worked case.
Go deeper: Lead-time pricing: how to price rush and economy orders