What pricing approach involves assessing customer savings against their payments?

The pricing approach that involves assessing customer savings against their payments is value in use pricing. This method focuses on the perceived value that a product or service brings to consumers based on the savings or benefits they receive from using it. Instead of just considering the cost of providing a product or a fixed markup over cost, value in use pricing takes into account the overall advantage or savings that customers experience, which can justify a higher price. This approach aligns the pricing strategy with the actual economic value the customer derives from the product, making it particularly effective in markets where the benefits are significant and measurable.

In contrast, the other pricing approaches do not emphasize the customer’s direct financial savings related to their payments in the same way. Markup pricing typically involves determining prices based on the cost of production plus a standard markup, without direct consideration of the customer’s perceived savings. Value pricing focuses on setting prices based on the perceived value to the customer, but it does not specifically quantify savings against payments. Cost-driven pricing, as the name suggests, bases the price primarily on the costs of production, which can overlook customer savings entirely. Therefore, value in use pricing clearly stands out as the approach that directly evaluates customer savings in relation to their payments.