Value-Based Pricing for Anti-Frictional Wear-Resistant Composite Materials

Vladimir Pankov, a 2nd-year student of Master's program "Governance of Science, Technology and Innovation", analyzes the applicability of customer value-based pricing approach to anti-frictional wear-resistant composite materials in oil extraction, compressors, elevators, construction machines, and railway markets. It was found that price does not represent the most important factor for making a purchasing decision. Instead, the most important factors for making a purchasing decision are product quality, easy-to-do-business-with and delivery capabilities of a supplier. The relative value for using anti-frictional materials from the customer’s perspective is higher than from the supplier’s perspective which means that it is relatively safe to conduct price increase experiments without losing customers. And since price increase is not likely to cause the increase of customer churn rate, customer value-based pricing does contribute to improving gross margin of the company.