What is Value billing?

Value billing is a method of charging a client for services rendered.

A value billing charge is one that is levied against a customer for the value rather than the cost of the services provided. This billing method is most commonly used when the value provided is unique and essential to the customer.

In areas where there is a competitive market for services, it is impossible for a supplier to enforce value billing because similar services can be provided by competitors at a lower cost.

The value-based pricing principle is most applicable in markets where owning an item improves a customer’s self-image or allows for unparalleled life experiences. To that end, the perceived value reflects the value that consumers are willing to assign to an item and thus has a direct impact on the price the consumer ultimately pays.

Although pricing value is an imprecise science, marketing techniques can be used to determine the price. For instance, Luxury automakers, solicit customer feedback in order to quantify customers’ perceived value of their driving experiences in a specific car model. As a result, sellers can now use the value-based pricing approach to determine the price of a vehicle in the future.