Spare Part Pricing for OEMs: Insight 6 – Value-Based Pricing

Pricing Insight #6/10 – Master Value-Based Pricing 🥋

Forget about part costs and mark-ups. With this method you start with the value created for the customer, and only then verify the price against other pricing methods: consistency, competition, and replace-vs-repair (see previous Insights). It is certainly more challenging, but it is also rewarding. Get this right, and you earn the black belt in part pricing!

Why it works:
Value-based pricing anchors the price in what actually matters to the customer: -the value it adds. It is particularly effective for complex or captive parts and services where direct competition is limited. Due to its complexity, it is normally applied to a small, carefully selected part of the portfolio.

Three ways to price based on customer value:
1. Pricing productivity gains (share future profit).
When a solution increases output or efficiency, pricing can be anchored in the future profit it creates. The discipline lies in sharing the value reasonably. This approach works best when the improvement is measurable and clearly linked to performance.

2. Pricing asset life extension (share existing profit).
When the value lies in keeping existing equipment running, such as retrofits, pricing should relate to the remaining profit potential of the asset. Customers are often highly rational in these situations. They quickly relate the price to what the asset still earns — and what a full replacement would cost.

3. Pricing risk reduction and peace of mind (perceived value). Some solutions create little measurable technical value yet remove significant business risk. Regulatory concerns, compliance or safety issues, or operational uncertainty often fall into this category. Here, pricing reflects the customer’s willingness to pay for operational certainty — not engineering hours, material cost, or development effort.

Bottom line 🧠
Your own cost is not a pricing input. Value-based pricing is about understanding the customer’s reality, anchoring the price in that value, and then validating it against the surrounding pricing logic. Master that loop and take your pricing to the next level. Black belt earned. Not yet convinced, or just uncertain how to get started? Bring in an experienced advisor, it is likely to be a very good investment.

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How do you currently segment your spare parts for pricing? What challenges have you faced ? Let’s discuss at https://www.linkedin.com/in/berntgunnarson/

You’re of course also welcome to contact us at bernt@naviro.se or call +46-70 6888288.