PERCEIVED-VALUE PRICING
An increasing number of companies now base their price on the customer’s perceived value. Perceived value is made up of a host of inputs, such as the buyer’s image of the product performance, the channel deliverables, the warranty quality, customer support, and softer attributes such as the supplier’s reputation, trustworthiness, and esteem. Firms use the other marketing program elements, such as advertising, sales force, and the Internet, to communicate and enhance perceived value in buyers’ minds.
Many use perceived value to set prices, pricing at a premium, although a competitor’s prices might be lower. When a prospective customer asks why he should pay more, the answer is: Matched Price | if it is only equivalent to the competitor’s | $$$ | price premium for superior durability | $$$ | price premium for superior reliability | $$$ | price premium for superior service | $$$ | price premium for longer warranty | $$$ | normal price to cover superior value | – $$$ | Discount for loyal customers | $$$ | Adjusted price |
The seller is able to show that although the customer is asked to pay a premium, he is actually getting far greater value! Ensuring that customers appreciate the total value of an offering is crucial.
Even when a company claims its offering delivers more total value, not all customers will respond positively. Some care only about price but there is typically a segment that cares about quality.
The key to perceived-value pricing is to deliver more unique value than the competitor and to demonstrate this to prospective buyers. Thus a company needs to fully understand the customer’s decision-making process.
The company can try to determine the value of its offering in several ways: managerial judgments within the company, value of similar products, focus groups, surveys, experimentation, analysis of historical