PerceivedValue Based Pricing
PerceivedValue Based Pricing
Thefollowing paper looks into the concept of valuing goods and servicesbased on the customer`s perceived gain, factors to be consideredwhile pricing and its level of success in marketing. The perceivedvalue pricing strategy refers to the consumers subjective benefitsacquired from using a product or service. It measures the differencebetween acquired benefits less the incurred cost. It involves a lotof comparison between various products which are offered by numerousplayers in the market. The consumer ends up choosing the product withperceived highest value in the market. The perceived value may alsobe measured by calculating the ratio between the expected benefits asa fraction of cost to be incurred that represents the sacrifice borneby the consumer[ CITATION Nag02 l 1033 ].Theperceived gains are both measured by value judgment and also viamonetary values that includes percentages and ratios. The higher theexpected gain the higher the consumer is willing to pay to get thegood or service.
Forvalue based pricing a number of factors ought to be considered .Theinitial aspect the management should perform is to conduct a surveyon the customers to know their perceived gain from the good[ CITATION Ken03 l 1033 ].itshould include identifyingthe various features and associated benefits consumers cite forchoosing the product .This could act to help in understanding whetherthe company is under valuing its products or overpricing them hencecould act as a pointer to making more profit[ CITATION Pet00 l 1033 ].Throughidentifying the key factors the company can be able to compete morefavorably against other service providers in the same industry[ CITATION Nag02 l 1033 ].Thefirm could work towards increasing the efficiency of the featurementioned by the customers during the survey. This will end upincreasing the uniqueness of product hence more sales thus profits.Through suchdifferentiation of the products in the market the firmsets itself up to gain customer loyalty and also retains them. Sinceany increase in prices is associated with increase in quality thusthe relationship with the customers is not destroyed.
Theother factor to be considered while pricing goods on perceivedacquired gain is the prices charged by the competing firms in thesame industry[ CITATION Ken03 l 1033 ].Thisenables the firm to assign value relative to other competitor’scharges and associated gains by the consumers. The firm may conduct asurvey a survey in the market to clearly identify what customersvalue in the competing products. The management can then be able tojudge favorably the associated value of its products compared to thecompetitors. This could act as lead to avoiding overpricing or underpricing of goods and services. As a result fair prices based onalmost the same value assigned to the product could be charged. Themanagement may also consider sanctioning of changes to be made to theproduct to surpass the value apportioned to products of competingfirms. Among the modifications that could be taken would beinstalling of features previously absent from the products to matchthe rivals. Later a promotional campaign may be launched to make theconsumers aware of new additions to the product. That way the firmmay be able to charge higher prices.
Theother key factor to be considered while assigning prices to productsbased on associated value is measuring the level of intangiblebenefits[ CITATION Ken03 l 1033 ].Thebenefits couldrange from level of comfort achieved by the consumerto the privacy issues and furthermore, the convenience in access. Themanagement could charge higher prices if the level of convenienceachieved is high and comfort too. Similarly the management could takemeasures to enhance the above feature to be able to increase theprices. For example home delivery of supplies could act as aninnovation geared towards charging higher prices in the market. Thefirm could also estimate whether it helps making customer feel greatby being on higher societal class that could act as lead to charginghigher prices thus more profit margins. If it is the case the firmcould embark on promotional campaign showing photographs of consumersusing the products.
Finallythe firm should calculate it perceived gains by the customers andcompare with the values got from the market survey to accuratelydetermine on the best possible prices[ CITATION Pet00 l 1033 ].Throughsuch an action the management is able to take full advantage of theconsumer surplus. That refer to the maximum price the consumer iswilling to part with to acquire a specific good or service. As aresult higher prices can be charged. The management could also launcha promotional campaign to make consumers aware of aware of variouskey benefits they stand to acquire for usage of a good or a service.This is well guided by the statistics collected during the marketsurvey. As the firm is able to promote features of the products werepreviously unknown to the consumer thus a better chance to chargehigher prices and still make more sales. Firm that charges
Nikeis an example of a company which utilizes the pricing strategy ontheir products based on consumers associated gain or acquiredbenefit. The firm has used a lot of monetary resource to market itsproducts to the markets as the best quality products existing in themarket in the sports wear category. As a results are willing to partwith finances and pay that are higher to acquire Nike`smerchandise..This is driven by the created notion of better qualitygoods which is associated with higher performance. Customers payhigher prices relative to the actual value due to proper marketingdone by Nike on the value of their products.
Themarketing strategy by Nike has been highly successful as it wellshown in their profit charts over a long period of time .Nike hasbeen able to sign major sport agreement s with major clubs across theworld. Nike has been able to attract top level talent to its group ofcustomers .this is ranging from the world footballer of the year toother major athletes in various Disciplines across the sportingworld. As a result it is evident that Nike company has positionedthemselves as one of the leading player in the supply of top rangesporting equipment and accessories. As supported by statistics Nikeis the leading world apparel supplier. For example in 2012 Nike`sglobal revenue amounted to 24.13 billion U.S dollars[ CITATION Pet09 l 1033 ].Againa continuous profit growth has been observed over the years.
Athorough review of the research data reveals that the firm is marketleader in sale of sport apparel ranging from northern America toacross the world. In 2013 the profits to soared a level high of $6.7billion that is a 7% increase from the previous year in the fourthquarter of the year[ CITATION Pet09 l 1033 ].theincrease in profits was driven by increased demand for productsproducedby Nike across the world. The levels of work progress also increasedto $25.3 billion. The years were described as great year bymanagement due to the growth in revenue levels.
Nikesmarket segmentation strategy has been very successful aided by theirusage and incorporation of science and technology[ CITATION Ken03 l 1033 ].Throughincorporation ofscience and technology the firm has been able differentiate itselffrom other market rivals. Since the firm is able to produceinnovative products that make itvery attractive to sports personsacross the globe. Additionally Nike has been able to segment themarket into various groups for example the footballers, basket ballplayers and other sporting events too. The firm is able to providetechnical analysis presentation through use of technology to thevarious sporting fraternities. Features such as enhanced stabilityare well enumerated thus increasing the attractiveness of theproducts to the customers.
Thefirm has also been able to correctly identify potential customerthrough a proper positioning of their brands[ CITATION Nag02 l 1033 ].Nikehas achievedthis thorough heavy investment into market research .This has enabledNike to identify key consumers needs and in turn they fulfill them.Furthermore, Nike has been engaging in intensive marketing throughusage of celebrity marketing and a lot of online presence on theinternet. Basically Nike has placed itself to fully access the wholeworld market to provide it goods and services. It has establishedsubsidiaries across the world to easily access the potentialcustomers. The given strategies have worked to Nikes favor as it hasbeen able to establish a worldwide presence making the market leaderin the world.
Thefollowing recommendations to Nike would be of high value .first, Nikeshould ensure it has established more subsidiaries across the worldto enable deeper market penetration[ CITATION Pet00 l 1033 ]hence more sales.Additionally, the level of marketing resources should be increased toenable more sales. Moreover research should be sustained to ensuremore innovative products are produced to the market.
Inconclusion firms should be encouraged to engage in value basedpricing since when well utilized it leads to high success rate ingrowth of revenues that is desirable to all firms
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