Traditional pricing methods involve a trade-off. You want to charge as much as you can in order to maximise profits, but not so much that there is a negative impact on sales. So, when a customer rejects your price, does it mean that the price is too high? According to Tom Nagle, maybe not. Price levels are only the visible tip of the iceberg in pricing strategy.

In order to get customers to pay for value, Nagle maintains, you can't just set a value-based price. Instead, you need to approach your markets proactively, with communications that justify your price in terms of value. You need to manage a price structure that tracks with value, and a pricing process that forces customers to acknowledge value with their pocketbooks.

Tom Nagle is the author of the seminal work The Strategy and Tactics of Pricing. Dr. Nagle has been a professor of marketing and strategy at the University of Chicago and Boston University. He is a graduate of Penn State University and received his PhD from UCLA.

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