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, 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).

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