Value-based pricing is a strategy that determines prices based on the perceived economic value a product delivers to customers rather than production costs or competitor rates. This approach involves a formula that incorporates the customer's willingness to pay, reference price, monetized differentiation value, and value capture rate. The formula ensures that prices do not exceed what customers are willing to pay while capturing a portion of the extra value the product provides. To effectively implement value-based pricing, businesses must analyze customer economics, competitive alternatives, and value creation, following steps such as mapping the customer's current state, identifying differentiation value, establishing a reference price, and testing willingness to pay. The strategy is most effective in markets with clear differentiation and measurable ROI, although it requires extensive customer research and careful management of different pricing segments. Tools like Orb can facilitate this process by allowing businesses to test pricing scenarios, implement complex value metrics, and adjust pricing models with precision, ultimately enabling companies to capture full product value and achieve revenue growth.