Customer Perceived Value – The base for your pricing strategy

Pricing is one of the linchpins of marketing strategy and success. Marketer’s need to get their pricing strategy right and it is always a big challenge to understand which price is the right for both my customer and me. Marketeers should understand how customers perceive value, because it is the value that is the ultimate arbiter of pricing.Robert Delan used true economic value(TEV) as a conceptual yardstick to measure how customers calculate what they are willing to pay. TEV is calculated as follows:

TEV = Cost of best alternative + Value of performance differential

TEV represents what a customer will actually pay for a product that delivers values in excess of its closest competition.

A pricing strategy is usually motivated by specific objectives of your strategy like gaining market share, skimming, maximizing unit sales, etc. There are many different pricing strategies like: Cost-plus pricing, Price skimming, Predator pricing, Prestige pricing, Bait and Hook pricing, Pricing promotions, and pricing based on CPV.

The most reliable method of pricing is to into the head of your consumer, and find out how your customers value your product against those of competitors and substitutes. Also, it is very important to ask the question whether this strategy is appropriate for the current phase of the product life-cycle (PLC).

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