Essay on What is the suggested relationship between price and perceived value?

Perceived value of the product can be evaluated as the estimated benefits (estimated gain) of the client, divided by the estimated cost (estimated give). Consumers perceive the actual price, thus forming the perceived price (which is different from actual price). Perceived price influences two aspects of customer perception: perceived quality and perceived financial sacrifice. The relationship of perceived quality and perceived price shape the value of the product or service perceived by the customer. In general, perceived price should be lower or equal to the perceived value of the product or service, for the product to be successful.

Question 2.  List some ways a firm can strategically increase its customers’ “perceptions of the value” of its offerings.

Firms can use the following methods of increasing the offering’s value: treating customer as special and offering “special” discounts, setting strict deadlines for the discounts, offering percentage discount instead of fixed discount or vise versa (choosing the larger number), offering first prices for new products intentionally lower than regular prices for these products in the future, and setting low prices in order to increase demand

Question 3. Do any of these ways have the potential of creating misperceptions and therefore deceiving customers? If so, how would you avoid such situation?

The practice of selling new products at lower prices will set low reference prices for the customers, and later price increase might lead to decrease in demand. In order to avoid this, the customers should be notified about the date of expected price increase.

Setting lower prices to increase demand might lead to the perception of the product or service as low quality one by the customers, if the prices become lower than the psychological threshold. Therefore, it is necessary to determine lower psychological threshold before offering low prices.

Discussion 6: Pricing Model is about your understanding of the relationship of “price-perceived value model”. Based on what we known about the price-perceived value relationship, how should we give advise to retailers to increase their profits?

Retailers should be aware of the differences between the actual price and perceived price, and the existence of reference prices. Retailers should also be aware of the compromise effect – the  tendency of customers to choose middle prices, and take into account price elasticity of their products. Furthermore, retailers should take into account that consumers are more sensitive to price increases than to price decreases. Finally, retailers should increase perceived value by managing personal customer experiences in an effective way.