When to Use Value Pricing Or Perceived Value Pricing – 2 Pricing Strategies

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Value pricing is a strategy that businesses with a high value product or service use. The strategy is to sell the high value product or service at a low, value price. Note: this price is not to be below cost but at what the customer would perceive to be 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 also are influenced by price comparison amongst similar products or services.

Often this value pricing strategy is used for products or services in their mature or declining life cycle stage; because at this stage in their product life cycle they have already, hopefully, built a strong brand identity. Use your product or service features, advantages and benefits to build value. Make those features, advantages 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 the presumption is that you have been producing this product or providing your service for some time (the product or service is in its mature or declining stage of its product life cycle), you need to look at how you are delivering the product or service and try to find re-engineering methods or ways to improve on costs of production and delivery. However do not reduce the value of your product in your efforts to lower your costs.

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

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

For example, if you are selling luxury cars through lease programs, you might include pick up and delivery at time of leasing and return; four free maintenance services, including pick up and delivery; a guarantee of service turn-around (on regular service items); etc. Your competition is not offering any additional services. You promote the value in your offer and cost that value (four free maintenance services have a value of $400, pick up and delivery has a value of the customer’s time saved, and more).

Price setting can be as much art as it is science, but make it more science (more measurable, more results oriented, more testable). Consider your customers, your competition, your market and your product or service offering when building your pricing strategy. The above example is quick and easy but there are lots 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 being real).

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