Every Loot system needs to assign a Price for a looted item.
Fixed Pricing will always assign the same Price for an item.
Blizzards Item Level
Blizzard has an internal formula to assign abilities to items, based on the Quality and item level. A basic formula to calculate an item's value can be:
Blue = (itemLevel - 1.84) / 1.6 Epic = (itemLevel - 1.3) / 1.3 Legendary = itemLevel
Apart from the calculation mentioned above this addon does modify the costs based on the item slot. See the ItemLevelDKP homepage for an in depth explaination.
Problems with Pricing token Rewards