Value Game
High-tech, luxury goods, and pharmaceutical companies in the Value Game take a value-based approach to pricing. The quality of their offering means they face less competition, while the offering’s broad appeal leaves customers with little buying power. That gives them the leeway to shape demand by aligning their prices with customer value and defending that value with obsessive marketing.
Your path to growth depends on:
- Deciding how much value to share with your customers: This is the essence of pricing strategy. Will you use your leeway to penetrate the market or earn higher margins?
- Establishing a pricing model that scales with value: A razor‐and‐blades model, for example, can help to encourage repeated follow‐on purchases. In some cases, pricing per outcome or performance can also make sense.
- Mitigating potential value erosion: Investments in innovation and branding ensure continuous improvement and protect the value proposition.
That last point indicates how Value Game players can lose their edge. That happens when they let competitors catch up (less innovation), when they lose control of their narrative (less marketing) or when they let their prices get misaligned with value.
RECOMMENDED READING
More Value Game Insights
Winning the Value Game
Welcome to The Game Changer Newsletter
White House plan to eliminate Hep C
Value Game Short Takes
Japan’s Tourist Surge: Can Differentiated Pricing Help Control the Overflow? — July 8, 2024
Japan has too many tourists. Is differentiated pricing the solution?
This article reports that Japan attracted an “unprecedented” 25 million tourists in 2023, as travelers took advantage of a sharp decline in the yen over the last five years. That’s why some Japanese tourist attractions have implemented significantly higher prices for tourists than for domestic visitors. By segmenting the market and charging tourists more, historical sites and other destination can generate necessary funds for preservation and maintenance while optimizing demand.
https://www.washingtonpost.com/world/2024/06/19/japan-tourist-price-yen
pricing new innovative products — May 27, 2024
According to Forbes, pricing strategy is especially important for new and innovative products. A price too low creates an impression in the buyer’s mind of a vendor that will overpromise, while a price too high will leave them unable to afford it. Meanwhile, a price equal to the competition makes it appear as a commodity where buyers will ignore the benefits. To find the most optimal price, companies should conduct “willingness-to-pay” research to measure what the target market and early adopters are willing to pay for the new, innovative product. Companies can do this by finding 25 or more potential customers, asking questions about product expectations, and offering a range of prices.
From Value Game to Choice Game — May 13, 2024
In the latest edition of the Game Changer Expert Interview Series, BCG’s Joel S. Weitzman takes a closer look at transitioning from the Value Game to the Choice Game. Watch his interview here as he describes why companies make the move, what companies need to understand about their consumers, and what you can do for a successful transition.
Shifting from the Value Game to the Choice Game can be motivated by different factors within a company. BCG pricing expert Joel S. Weitzman details how a company can successfully make this move and gain competitive advantage in the latest installment of the Game Changer Expert Interview Series.
To learn more about strategic pricing and the new book from BCG’s pricing practice.
In the latest edition of the Game Changer Expert Interview Series, BCG’s Joel S. Weitzman takes a closer look at transitioning from the Value Game to the Choice Game. Watch his interview here as he describes why companies make the move, what companies need to understand about their consumers, and what you can do for a successful transition.
Apple Vision Pro adoption — May 7, 2024
Apple Vision Pro, the $3,499 headset launched in February, may not have a killer app for consumers yet, but it has apparently seen a high level of adoption among businesses. Apple CEO Tim Cook said during the company’s earnings announcement last week that “it’s great to see the enthusiasm from the enterprise market” and noted that more than half of all Fortune 100 companies have purchased units and have begun to explore useful applications. This is in line with my assessment back in February, that “a vast source of value for Vision Pro could be business applications, with the creation of a supporting ecosystem.” It is still early in the Vision Pro’s life cycle, and the early inroads into the business market are a positive sign.
Tim Cook says half of Fortune 100 companies have bought an Apple Vision Pro
Can different pricing models address obesity problem? — March 11, 2024
Honored to be featured in a recent piece by AJMC, discussing innovative pricing models to tackle America’s obesity crisis. The article explores the potential of outcome-based and models to make obesity management solutions more accessible and effective. By aligning costs with patient outcomes, we can encourage investment in long-term health benefits and drive down health care expenses related. As we navigate the complexities of economics, it’s crucial to adopt models that not only enhance patient access to treatment but also ensure sustainability for providers. The conversation around different pricing strategies is just the beginning.
Can Different Pricing Models Address the Obesity Problem in America?
Inflation higher than expected — February 13, 2024
Inflation in the US was higher than expected in January at 3.1%, but as always, such numbers come with caveats. First, as I mentioned in the last Game Changer newsletter of 2023, it’s time to break away from looking at prices in aggregate. The headline inflation rate in any country is a symptom of that problem. The challenge is to find the right level of disaggregation or “de-averaging” to understand how prices are changing in a given segment or sector, what the underlying cost trends are, and how the perception of higher or lower prices affects customers’ future buying behavior and willingness to pay.
We’ll know more about the underlying cost trends in the US when the producer price indices come out on Friday this week. Second, the right response – if any – depends on the nature of the pricing game you are playing. A company negotiating prices in the Custom Game might notice that higher price trends benefit their customers’ customers and can take that into account. In the Uniform Game, the price changes for many consumer products can deviate significantly from the headline number, which means each company needs to understand the distinct dynamics of its own market. How does today’s inflation report affect your pricing strategy?