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Value-based pricing is the method of setting a price by which a company calculates and tries to earn the differentiated worth of its product for a particular customer segment when compared to its competitor. It is customer-focused pricing. The marketer can determine a suitable value-based price for each segment. This method only works when the target segment has a specific competitor’s product they can buy instead. The next best alternative is the starting point of comparison for calculating the value-based price. Therefore, a business must understand customer value in order to set the right price to persuade customers to focus on total costs rather than simply on the acquisition price. Customer value is the perception of what a product or service is worth to a customer compared to the next best alternative. The model is based on assessments of the costs and benefits of a given market offering in a particular customer application, as shown in Figure 5. Value is the worth in monetary terms of the technical, economic, service, and social benefits a customer receives in exchange for the price it pays for a market offering.