Prices and Perceived Value

To what extent can a higher price be considered an indicator of greater value for the customer?

Friday, June 29, 2018

Ariel Baños, pricing expert and founder of Fijaciondeprecios.com, analyzes two interesting cases to try to explain what factors are most important for customers when assigning value to a product or service.

From the article "Do we value things more when they are more expensive?":

1. The free versus paid for 
I had prepared with great enthusiasm to deliver a conference in Cordoba. It was my first activity in that city, organized by an important private university. It was an event that was free of charge for the participants, but required registration in advance. The forecasts indicated an attendance of at least one hundred and twenty people, according to the registrations counted the day before the event. This meant that the event would be held in the main hall of the house of studies.

The day of the conference dawned very cloudy. From midmorning a great storm began with intense rains that did not stop all day. The conference, scheduled for 6pm, had only twenty participants (less than 20% of the registrants!) They looked lost inside the huge hall.

Would the situation have been different if, instead of being a free activity, the enrollees had been charged? If they had had to make an economic effort would there have been more incentive to overcome the bad weather? There are no conclusive answers, although it is reasonable to think that the dropout rate would have been much lower (as well as the initial number of enrollees), even if they had paid a low amount of money.

It is natural to assign greater value and importance to that for which we make some economic sacrifice, as opposed to what happens when we get something for free.

Read full article (in Spanish).

More on this topic

Keys to Stop Competing for Price

April 2019

Identifying a segment that values the differentials of the product or service and charging a price aligned with the company's strategy are essential to avoid competing with the lowest prices in the market.

Ariel Baños, specialist in price management and founder of Fijaciondeprecios.com, explains how through the implementation of an appropriate strategy, it is possible to compete in a market where there are suppliers who charge derisory prices.

The Ideal Price System

March 2018

The challenge in defining the most appropriate pricing system for each company is to identify what value the products and services sold have for each customer.

The founder of Fijaciondeprecios.com, Ariel Baños, explains the key elements for determining how companies should establish prices for their products and services. Baños notes, "...The price should be related to the value for each client " , but the complexity is in being clear about that value, since " ...When we buy something in general we are not completely sure of the results we will get when using it."

How to "Cheapen" a Product Without Lowering Its Price

October 2013

Clients perceive something as cheap or expensive based on all the information that accompanies its price.

Learn how to improve price perception of your product or service without having to give discounts to customers.

By Ariel Baños
President and founder of FIJACIONDEPRECIOS.COM

The 5 Most Common Errors in Pricing Strategy

November 2011

There is no faster and more effective way of dooming a good product to failure, than by choosing the wrong pricing strategy.

Companies often put great effort and investment into launching new products. However, everything can go wrong when the pricing strategy fails. Let's look at five examples that can ruin a good project, according to Ariel Baños, economist at Fijaciondeprecios.com and author of "The Secrets of Prices" (Ed.

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