You're the pricing lead at an enterprise software company in Montevideo. Your new product lets the customer run the same workload with far fewer servers and far less operating time: it saves them a fortune. Now comes the million-dollar question: what price do you sell it at? Finance wants cost-plus-margin; sales wants to match the competitor's price to "keep things simple." But the right price doesn't live in your cost or the rival's: it lives in the economic value you deliver to the customer. That's the lesson of Atlantic Computer, whose package was worth the servers it saved the customer, not what it cost to build.
The situation
Value-based pricing sets the price according to the economic value to the customer (what you save them or help them earn), not your cost or the competitor's price. You quantify the value-in-use —how much the customer saves versus their best alternative— and set a price that captures a fair share of that value: high enough to reflect what you deliver, low enough below the total value that switching still makes sense for the customer. Atlantic Computer could charge well above cost because its package saved servers; Cumberland Metal priced for the savings it generated, not the cost to manufacture.
Here's the trap, in two directions. Cost-plus-margin is comfortable and feels "fair," but it completely ignores what the customer saves: if your product saves them ten times its price, you leave almost all the value on the table. And copying the competitor's price forfeits the premium your product deserves: you anchor to the wrong reference and give away your differentiator. The defensible move is to set the price based on value to the customer: quantify the value-in-use and capture a fair share —not so little that it matches cost, not so much that it matches total value and leaves the customer no incentive to switch.