Value-Based Pricing Calculator
Calculate the Economic Value to Customer (EVC). Determine your price based on the tangible value you create relative to the next best alternative.
Price of Next Best Alternative
Economic Value Waterfall
The Value Stack
Total Economic Value: $75.00
Differentiation
You offer $25.00 more value than the competitor.
Recommended Price
By capturing 50% of your added value, you should charge $62.50. This leaves $12.50 of surplus value for the customer.
The Win-Win
Because your price is lower than the Total Value, the customer feels like they are getting a deal, even though you are charging a premium.
Execution Steps
Set the 'Reference Price' (What does the next best competitor charge?).
Add Positive Drivers (What value do you add? e.g. Time Saved, Revenue Gained).
Add Negative Drivers (What costs/risks do you add? e.g. Learning Curve, Migration Cost).
Set 'Value Capture %' (How much of the extra value do you keep? 50% is standard).
Pro Strategy
- Always start with the 'Next Best Alternative'. If the customer doesn't buy you, what do they do? (Excel? A Competitor? Hire an intern?).
- Quantify intangible benefits. 'Peace of mind' = Cost of insurance or risk of downtime.
- Don't underprice. If you create $1M in value, charging $100k is a steal. Cost-plus pricing would leave that $900k on the table.
Core Concepts
Economic Value to Customer (EVC)
Reference Value + Differentiation Value. The absolute maximum a rational customer would pay for your product.
Differentiation Value
The value of your unique features compared to the competitor. This must be quantifiable (e.g., in dollars saved or earned).
Consumer Surplus
The difference between what a consumer is willing to pay and what they actually pay. You need to leave some surplus to motivate the switch.
What is Value-Based Pricing Calculator?
This tool uses the EVC (Economic Value to Customer) framework. It builds a pricing waterfall starting from a reference price (commodity value) and stacking positive and negative differentiation values to arrive at the Total Economic Value. The recommended price is a strategic portion of this total.
Best For
- • B2B pricing strategy.
- • Launching innovative products with no direct comparison.
- • Justifying a premium price in sales negotiations.
Limitations
- • Requires quantifiable data for abstract benefits.
- • Assumes rational buyers.
- • Difficult to prove values to skeptical prospects.
Alternative Methods
Cost-Plus
Pricing based on expenses (ignore value).
Van Westendorp
Pricing based on perception/surveys.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Industrial Software
Competitor was free (Excel).
Calculated time saved per week (5 hrs) x Avg Salary ($50/hr) x 50 weeks = $12,500 value.
Medical Device
Hospital used cheap disposable tools.
Showed that premium tool reduced surgery time by 10 minutes ($1000 in OR time cost).
Consulting
Client wanted hourly billing.
Shifted to value-based. Showed that the strategy would generate $1M revenue.