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Basics of Marketing - Kotler Philip

Setting prices based on the perceived value of goods

An increasing number of firms in the calculation of prices begin to proceed from the perceived value of their goods . The main factor of pricing is not the costs of the seller, but the buying perception . For the formation in the minds of consumers of the idea of ​​the value of the goods, they use non-price methods of influence in their marketing complexes. The price in this case is designed to match the perceived value value of the goods.

Please note that in different establishments identical products have different prices. A cup of coffee with a slice of apple pie can cost the consumer in a drugstore-diner at $ 1.25, in a family restaurant - at 1.50, in a hotel cafe - at 1.75, when served in a hotel room at 3.00 and In a chic restaurant - at $ 4.00 Institution of each next level can set a price higher, because the very atmosphere of it informs the merchandise of additional value.

A firm that uses the pricing method on the basis of the perceived value of the goods, it is necessary to identify what value representations exist in the minds of consumers about the products of competitors. In the previous example, consumers could be asked how much they are willing to pay for the same coffee and pie in different settings. Sometimes you can ask a question about how much buyers are willing to pay for every profit that is added to the offer. In Box 25, it is just how Caterpillar uses the value of various goods related benefits when assigning prices for its construction equipment.

If the seller requests more value of the goods recognized by the buyer, the sale of the firm will be lower than it could be. Many companies overstate the prices of their goods, and they are not doing well in the market. Other firms, on the contrary, assign too low prices for their goods. These goods perfectly go on the market, but they bring the company less revenue than they could at a price raised to the level of their value significance in the presentation of buyers.

Box 25. Establishment of the price, based on the perceived value of the goods, using the example of Caterpillar

Caterpillar uses factors of consumers' perceived value of the goods when setting prices for their construction equipment. It can, say, estimate its tractor in 24 thousand dollars, while a similar competitor's tractor costs only 20 thousand dollars. And at the same time, Caterpillar's sales will be higher than that of a competitor! When potential buyers are interested in the dealer, why they should pay for the tractor "Caterpillar" for 4 thousand dollars more, he answers:

20 thousand dollars - the price for a tractor, simply analogous to a competitor's tractor

3 thousand dollars - premium mark-up for increased durability of the tractor "Caterpillar"

2 thousand dollars - a premium for its increased reliability

2 thousand dollars - a premium for an increased level of service

1 thousand dollars - the cost of a longer warranty on the units and parts

28 thousand dollars - the price of a set of all values

4 thousand dollars - discount

24 thousand dollars - the final price of the tractor

Amazed consumers learn that, despite the premium mark-up of $ 4,000, which they have to pay, they actually get a discount of $ 4 thousand! The matter ends with the choice of the Caterpillar tractor, since the consumer is confident that the costs of operating this tractor during the whole period of its service will eventually turn out to be lower.