Because a company generally cannot afford always to have prices below the value assessment mark, however, companies must be selective in when they offer sales, ideally finding a way to balance the price the customer thinks is fair with the realistic cost of operations and production the company has. Conversely, placing prices below the assessed value improves customer surplus and customer experience. This may have a negative impact on the customer's experience and stop customers from making future purchases. A business looking to adopt the value-based pricing strategy must ensure that its product or service offering is of certain qualities. If a company places its price beyond the value the customer assesses or the amount the customer is willing to pay, then consumer surplus is reduced or eliminated. For example, Starbucks raised prices to maximize profits from price insensitive customers who value gourmet coffee, while losing consumers who seek cheaper prices. Value for customers is the difference between their appreciation of a product or a service and what they have to pay for it, says Harvard Business School Professor Felix Oberholzer-Gee in the online. This can help customers feel like they had a good experience with the company and impacts customer loyalty. Value-based pricing is a business strategy that primarily relies on customers’ perceived value of goods or services to determine cost. Value Based Pricing is an approach where you set your prices based on the value of your product or service to your customer. Marketers usually generate consumer surplus by lowering prices, such as with sales. Consumer surplus is an economic term referring to the difference between what a customer was willing to pay and the amount he actually paid.
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