McKinsey Classics: July 2013

How to manage customer value

Lots of companies confuse “value pricing” with low prices. In reality, people buy products and services not on price alone but on customer value: the relationship between costs and benefits. Although this trade-off has long been recognized as critical for marketing, businesses frequently get their price–benefit position wrong.

Even when they don’t, many ignore its “dynamic” effect—the reactions of competitors and customers, not to mention the impact on an industry’s profitability. Yet even in 1997, when we published the perennially important “Setting value, not price,” advances in market research had made this kind of dynamic value management much easier.

Did you miss the previous Classics Newsletter?

Motivating without money

In hard times, it’s hard to motivate employees by upping their pay. Besides, many studies suggest that for people with good salaries, some nonfinancial incentives work better. McKinsey survey respondents regarded three of them—praise from managers, leadership attention, and a chance to lead projects—as no less effective than three financial motivators: cash bonuses, higher base pay, and stock or stock options.more

McKinsey Classics | July 2013

How to manage customer value

Related reading

Pricing in a proliferating world [includes audio] August 2006

Pricing new products August 2003

The power of pricing February 2003

Bringing discipline to pricing February 2000

Did you miss the previous Classics Newsletter?

Motivating without money