Value is not the same as price
In order to create an effective pricing strategy for your products or services, you need to understand your customer’s perceived value of your offering.
Value is a complex issue. Different customers perceive the value of a product or service on factors varying from quality through to brand equity, ethical considerations, environmental sustainability and customer service etc.
Customers rarely purchase based on price alone. Most customers (over 50% according to a recent study), make a buying decision based on brand. As such, your brand must create a point of difference in order to achieve a competitive edge. The key is to add value to your brand’s proposition so that price is not the key differentiator.
Understanding the demographics of your client base can pay dividends in adding value (perceived or otherwise) to your brand. Older or more sophisticated customers often place a higher value on quality and customer service. This is because they are financially more secure and tend to spend money on fewer items, while choosing brands that they trust to deliver an expected level of quality and service.
Younger customers tend to want cheaper prices because they are often less financially secure. As such they are more likely to purchase from disruptive brands and, as a result, are more likely to be happy with online delivery channels.
Most of all, customers tend to favour brands whose values match their own. So, if your customers tend to favour innovation then you should try to position your firm as an innovative player in your respective market.
If your clients favour ethical brands that are big on promoting environmental sustainability, you should try to reflect these values in the way that you market your firm. Your pricing strategy can then reflect this added value in order to deliver a product or service at a level that generates a sustainable level of profit for your business.