Imagine if automakers sold cars the way beef producers sell cattle. If they did, a Cadillac, Chevrolet and Volkswagen would all be sold for $15,000 each.

Sounds ridiculous, right? Yet cattle feeders have long been buying both fancy and cheap calves, feeding them awhile and then selling them all for $68 per hundredweight. Why produce a luxury model if the cheap product gets the same price?

Innovative producers recognize this quandary, and an increasing number of cattle are being sold based on individual value. The next challenge facing producers is to identify new marketing systems that combine the benefits of value-based marketing with competitive price negotiations.

Improving beef quality

A value-based pricing grid is much like the sticker price on that new truck you want to buy. The standard truck value starts with a base price. Add four-wheel drive, leather seats and air conditioning and the value goes up. By using a system of premiums based on carcass specifications such as quality grade, yield grade and carcass weight, producers also can receive compensation for the added value each animal possesses. Meanwhile, buy a truck with a lot of miles or hail damage and get a discount from the base price. Miss the specifications for weight or age, and that carcass will be discounted as well.

Advocates of value-based marketing believe it sends the right economic signals from the consumer to the producer.