DEFINITION of 'Customer-Driven Pricing'
A method of pricing in which the seller makes a decision based on what the customer can justify paying. Customer-driven pricing is not simply what the consumer is willing to pay, but reflects the value of the product or service from the consumer's perspective. Pricing decisions are made to justify purchase decisions and are at a level that convinces the customer he/she benefits from the transaction.
BREAKING DOWN 'Customer-Driven Pricing'
To optimize pricing, companies need to consider how to best segment the market so that prices reflect the differences in value perceived by different types of consumers. To do this, companies must ensure that there is a comprehensive understanding of the customer and what he or she values. A company would make the most money if they could figure out the maximum each customer would pay, and charge them that amount.