When to Use Value Pricing or Perceived Value Pricing: 2 Pricing Strategies

value prices it is a strategy used by companies with a high-value product or service. The strategy is to sell the high value product or service at a low value price. Note: This price should not be below cost but rather what the customer would perceive as a low price.

Customers’ perceptions are influenced by the value they perceive in the relationship between the attributes of the product or service and the price they will have to pay for that product or service. Customers are also influenced by price comparisons between similar products or services.

Often this value-based pricing strategy is used for products or services in their mature or declining life cycle stage; because at this stage of their product lifecycle they have hopefully built a strong brand identity. Use the features, advantages and benefits of your product or service to generate value. Make those features, perks and benefits unique and not easily duplicated. But look to build unique features and benefits into your products and services that are low cost and have some economies of scale.

Since you are supposed to have been producing this product or providing its service for some time (the product or service is in its mature or declining stage of its product life cycle), you should look at how you are delivering the product or service and try to find reengineering methods or ways to improve production and delivery costs. However, don’t reduce the value of your product in your efforts to reduce your costs.

Once you’ve developed a low-cost strategy for your high-value product or service, create a strong promotion program that focuses on brand identity, key values, and the benefits of those values, and sell them to your market.

Perceived Value Pricing it is a strategy that is a variation of value pricing. This strategy is best used if pricing is established within a product line and if one product strengthens another product or products in the line. Your customers’ perception of the entire product line offering will affect how they view your price for one of the products in the line. Selling products or services of perceived value can be achieved by doing a cost comparison for your customer.

For example, if you sell luxury automobiles through leasing programs, you may include pickup and delivery at the time of the lease and return; four free maintenance services, including pickup and delivery; a service delivery guarantee (on regular service items); etc. Your competition does not offer any additional services. You promote value in your offer and charge them for that value (four free maintenance services are worth $400, pickup and delivery is worth customer time saved, and more).

Pricing can be both art and science, but make it more science (more measurable, more results-oriented, more verifiable). Consider your customers, your competition, your market, and your product or service offering when creating your pricing strategy. The example above is quick and easy, but there are plenty of other good applications for using perceived value pricing as long as you can promote and show the value to your customers (and your customers accept that value as real).