Perceived Value Pricing

Perceived Value Pricing

Perceived Value Pricing is the arbitrary pricing of a product based on its value as perceived by its buyers, as opposed to pricing based on the seller's costs of producing the product.To simplify, value-based pricing means that the marketer cannot design a product and marketing program and then set the price. Price is considered along with the other marketing-mix variables before the marketing program is set. The company uses the nonprices variables in the marketing mix to build perceived value in the buyers' minds, setting price to match the perceived value. Most marketers are aware that consumers must feel as if they are getting a good deal for their money. Therefore, they are getting a good value. This concept has not changed over time, because that consumer's perception of value is the real key. Perceived value is the goal of any good pricing strategy. It is the price that consumers feel is appropriate in order to have this feeling of getting a good deal. If consumers do not perceived that they are getting a good value, they will not buy (Geiger 2000).

Geiger (2000) also says that the foremost factor for pricing strategy is "supply and demand". If there is great supply, price lowers to compete. If there is little supply, price higher to profit. When there is little demand, price lower to make a sale and when there is great demand, price higher because the consumer will pay. He recommends that whichever way we decide to approach your pricing strategy, we should not forget about consumers' perceived value.

This strategy can be used in markets where demand is known to be price elastic-perhaps from previous company experience in this market. This "perceived value" can be established by means of market research, for example by asking focus groups how much they think the price is of this product. The more prestigious