A pricing case asks what should the client charge? It might be a new product, a re-priced old one, a whole line, or a response to a competitor's move. The commonest failure, in interviews and in real rooms, is to answer it with cost. Cost tells you the floor and almost nothing else. Price gets set inside a triangle of three lenses, and the craft is knowing which corner should rule.
What are cost-plus and competition-based pricing?
Lens 1 is cost-plus, the floor. Take the fully loaded cost to serve one unit and add a target margin. It's the floor because selling below it destroys money on every unit. In the short run that means below variable cost, and in the long run below fully loaded cost. It's a floor and never an answer because it only looks inward. It knows your factory and nothing about your customer's alternatives or willingness to pay. Amateurs stop at cost-plus. Professionals start there. Its one virtue is that it stops you pricing below the money-losing line. Its one proper use as a primary lens is in cost-plus-contract or regulated settings, where price is literally defined as cost plus a permitted return.
Lens 2 is competition-based, the anchor. Look at what close substitutes charge. Competitor prices are the market's revealed anchor, and they're the reference your customer will actually use. You can't do without this lens, and it still isn't enough on its own. You need it because a price wildly off the competitive set needs a reason the customer will accept. It falls short because "match the competitor" dodges the question. It assumes your offer is a commodity, and it imports the competitor's pricing, which may well be wrong. Use it to find the range, and to force the question every premium price has to answer: why should the customer pay more than the alternative?
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What is value-based pricing?
Lens 3 is value-based, the ceiling. This is the lens that separates real pricing from arithmetic. It's built on economic value to the customer (EVC): the price of the customer's best alternative, called the reference value, plus the money value of everything your offer does better, called the differentiation value, minus the value of everything it does worse. EVC is the ceiling. At that price the customer can't choose between you and the alternative. The right price is below it by enough to leave the customer a clear surplus, which gives them a reason to switch and a reason to stay. Value-based pricing is why a drug that saves a hospital ₹5 lakh in avoided complications can price at ₹1 lakh and still be a bargain. Priced cost-plus, the same molecule would leave ₹4 lakh on the table. So quantify the reference value. Quantify the differentiation in the customer's own money: time saved, defects avoided, revenue enabled, risk reduced. Then let that set the ceiling.
How do the three pricing lenses fit together?
The three lenses don't carry equal weight. Cost always sets the floor, and you never knowingly price below it. Competition sets the anchor and the range. Value sets the ceiling, and wherever your offer really is differentiated, value should rule. You price to the value you create and capture a share of it. Cost is only there to check you clear the floor, and competition only to check the customer has no cheaper way to the same outcome.
Two more moves finish the toolkit. The first is elasticity and contribution. A price change moves volume, and what you care about is contribution, meaning (price − variable cost) × volume. Revenue is the wrong target. A price rise that loses some volume can still raise contribution if demand is inelastic enough. The subtle crown point is that even at unit-elastic demand, where revenue doesn't move, the higher price wins, because you incur variable cost on fewer units. The second move is segmentation and structure. The same product can carry different prices for different segments through versioning, bundling, two-part tariffs or good-better-best. That lets you capture more of the value surface than a single price ever could, and the pricing structure is often worth more than the headline number. Worked Example 1 runs all three lenses on one Indian launch and prices to contribution.