ABSTRACT
After developing products or services that create value, a marketer must then determine how most profitably to capture that value in both volume and margin. The challenge in doing so is that customers value products differently because of different abilities to pay, different preferences, and different intended uses. Moreover, the timing of customers’ needs, the speed of their payments, and the level of service and support they require can drive significant differences in the cost to serve them. When a company tries to serve all customers with one price, or a standard markup in the case of distributors and retailers, it is forced to make large tradeoffs between volume and margin-enabling some customers to acquire the product for much less than they would be willing to pay for it, while others are excluded even though the lower price that they would pay is sufficient to cover variable costs and make a positive contribution to profit.
