Value Generation Pricing

A framework for positioning products based on value creation rather than cost savings, which can lead to significantly higher pricing power and customer adoption.

Core Principle

• Don't sell time savings or cost reduction - customers don't value these highly
• Focus on value generation and growth potential instead of cost savings
• Same product can be positioned differently to command vastly different prices

Value vs Cost Example

• Cost-saving positioning:

  • "This product halves your marketing costs"
  • Customers typically only willing to pay 25% of saved costs
  • Results in much lower pricing power

• Value-generation positioning:

  • "This product doubles your leads"
  • Customers willing to pay 100% more since they already spend that amount on leads
  • Same product, but 4x higher pricing power through value framing

Framework for Value-Based Positioning

• First focus on generating maximum customer value
• Then decide how to split that value with customers through:
  • Direct pricing
  • Higher retention rates
  • Customer advocacy/referrals
  • New customer acquisition

Key Implementation Points

• Demonstrate value in terms of growth/gains vs savings
• Position around outcomes customers already spend money on
• Frame benefits in terms of value multiplication vs cost reduction
• Let customers experience the value before optimizing pricing
• Build pricing power through proven value delivery

Common Mistakes

• Leading with time savings messaging
• Focusing on cost reduction vs value creation
• Under-pricing due to cost-based positioning
• Not demonstrating value in customer's terms

The key insight is that the same product can command dramatically different prices based on how the value proposition is framed and communicated to customers. Focus on value creation over cost savings.