Price is the only element of the marketing mix (product - price - place - promotion) that produces profit, the rest determine costs. The price of a product consists of cost (all costs of manufacturing the product) and added value.
Due to this premium, the price can be raised significantly and thereby increase profits. The amount of this premium is determined by the perceived value of the product to consumers. Buyers compare the merits of a purchase and the costs of it. When a product provides the best value-to-cost ratio, the customer makes a purchase.
The value is determined by the qualitative and quantitative characteristics of the product, or the amount of economic effect received by the consumer during the use of the product (savings). This is what convinces a buyer to pay more for a particular product than for a competitor's equivalent. Depending on the specifics of the product, the value can be expressed in:
availability of service (availability of components, consumables),
simplicity and ease of use, storage,
savings from use (lower gasoline consumption), etc.
The perceived value of a product to the buyer is based on complete knowledge and understanding of the end use of the product. A correct assessment of the value advantages and disadvantages of a product allows you to set the right price (not inflated, which hinders trade, and not underestimated, at which part of the possible profit is lost). To estimate what price a buyer is willing to pay, it is necessary to identify and characterize the various forms of satisfaction or service provided by the product, as well as the total cost of the purchase.
The economic value calculation method is implemented in the following procedure:
1). Determining the price of indifference is the determination of the price (or costs) associated with the use of that good (product or technology) that the buyer is inclined to consider as the best of the alternatives actually available to him.
2). Determination of differences - determination of all parameters, cat. distinguish our product both for the better and for the worse from the alternative product.
3). Assessing the significance of differences from the buyer’s perspective - assessing the value for the buyer of differences in the parameters of our product and an alternative product (competitor).
4). Summing up the price of indifference with an assessment of the positive and negative value of the differences between our product and an alternative product.
Perceived value is a tool for positioning a product (differentiation from competitors' products) and a tool for increasing profits by justifying a higher price.
Last week we finished at a plumbing wholesale company. A survey of sales department employees revealed that the only argument they use when working with clients is price. That is, in order to sell their product, in most cases they offer a price lower than that of their competitors. Of course, the company's management is dissatisfied with this approach of managers: it leads to a decrease in profits. Sales managers reported that they did not know of other ways to increase the value of their offering. But the audit also revealed that this company has a number of competitive advantages that really set it apart from the rest.
We decided to figure out what is hidden under the statement “”. And at the same time, remember proven ways to increase value, which many people know about, but for some reason not everyone uses. First, let's understand the terms.
What is value?
Value is the benefit for which the customer pays when purchasing our product. The more benefits and benefits the customer sees, the higher the price he is willing to pay, and the more difficult it is for competitors to offer an alternative.
We like the value formula proposed by Neil Rackham, author of the famous SPIN™ selling model:
Value = Benefits – Costs
Thus, value can be increased in two ways: through increasing profitability and through decreasing costs or value. Our heroes, plumbing equipment dealers, followed the second path - reducing the cost.
When the buyer understands what benefits he will receive now or in the future from our product, it is easier for him to part with his money. An important point: in the eyes of the buyer, the benefits of working with us or purchasing our products should be higher than the amount he pays. Therefore, the main task of all sellers is to show the product to the client in such a way that the value in his eyes increases to the maximum.
When the price of a product is less significant than the benefits the customer receives, the sales manager can only ship the product. There is no work on his part here. There is no benefit for which the company pays him. After all, a sales manager is hired not to sell cheaper, but precisely to increase costs!
Strategies for increasing customer value
Strategy #1: Increasing profitability
Profitability, expressed in monetary terms, fundamentally influences the purchasing decision. You can increase profitability during the presentation of the product. It should be clear from the manager’s words how much money cooperation with us will bring to the client. On the other hand, benefit is not always a benefit in money. It may also involve increasing the level of comfort, status, and security. This can also save time and effort. It may also be a simple solution to the problem in a short time.
It happens that the benefits of purchasing a product become so attractive to a person or company that they are willing to pay even more for it than they have. Bank lending is based on this principle - if a company receives income higher than the cost of servicing the loan, then this is a profitable deal.
Strategy #2: Reduce Costs
We include the cost of production for the client as costs. A decrease in value leads to a decrease in the seller's profit. We are not interested in this approach. But costs are not always just about cost. It could also be labor costs, time, lost profits.
When there is an opportunity to reduce the client's costs without reducing the cost of your offer, you need to take advantage of it. For example, you can deliver the pipes the client needs not in 2 days, like your competitors, but the next day after payment. This means that his team of plumbers will not be idle for the whole working day, and the client will not pay them a salary for a day of idle time. Not a single buyer who, in such a situation, chooses an offer that is 5,000 rubles cheaper than yours will proudly declare: “But I got an additional discount on pipes!”
Client costs can also be reduced by using payment options that are more beneficial to the client. For example, our price includes VAT or our working conditions require an advance payment of only 50%. The client should learn about each element of the service that reduces the client’s costs, be it delivery, installation of products, repair, maintenance, or training in use, 24-hour technical support from your proposal.
Why do customers ask for discounts?
When a customer asks for a discount on a product, there may be several reasons for this.
- The client wants to save money without having other better offers. The client wants to purchase a product or service from a company and get a better price for the product he needs. This is certainly a reasonable approach on the client's part. Even very rich people, such as Warren Buffett, do not neglect the opportunity to take advantage of the discount. In such cases, sales managers believe that by lowering the price they will remove the remaining doubts of the client and sell to him here and now. However, it is possible that in this case they are missing important factors influencing the purchase - the presence of need, urgency, money and authority for the client to independently make a purchasing decision.
- The client bargains reasonably, having offers from several suppliers in hand. This situation allows the client to choose the best option. Who is more similar, who will give the best price, who is more interesting, more convenient, more promising and more prestigious to work with. In this case, the sales manager should not rely only on a low price in his offer - tomorrow the competitor will lower it by another ruble and the deal will be his. against a competitor and win over the client by having other advantages other than price. An example would be a situation where he demanded a price reduction, and all managers agreed to this, thereby harming each other. But they wanted to get this client so much that in the competition they reached the point where the sale itself to this client became unprofitable. And the one who could not sell to this client was in a better position than the manager who made the deal. In such cases, the sales manager should always be supervised by management so that his pursuit of a competitor does not cause damage to the company.
- The client does not have enough money, but there is a need for the product. Here the sales manager’s task is to determine the client’s real financial situation and sell him a suitable product.
10 Ways to Add Value to Your Proposition During the Sale
In the case where increasing the value of a product depends on the sales manager, several standard proven methods can be identified.
- Clearly understand the client's main pain. If you understand the customer's challenges, risks, and limitations, then you can influence value by offering a good solution to those problems. Customers are willing to pay more for a quick solution to problems than for a simple increase in comfort. Behind every need there is some kind of customer problem. Think about it and come up with a list of the 10 most common problems that you can solve with your product.
- During negotiations, conduct a presentation of a product or service in the language of the client’s benefit. This means that it is necessary to talk not only about the characteristics and benefits of the product itself, but also about the benefits that the client will receive from using it.
- Limit demand. In this method, it is necessary to create a shortage of goods in a specified period of time at a specified price.
- Use recommendations from friends and other people who are authoritative for the client - what a person has heard about, what he has already been told and recommended about many times, he will buy more willingly than some unknown thing from an unknown company.
- Make high-quality advertising and marketing materials, a website and generally look good. Value is enhanced by the way your offering looks. Everything has an impact. Photographs, text, design, printing. The better and more expensive your printed or electronic presentation looks, the better the client's opinion of you.
- Give gifts instead of discounts. The value of the offer can be increased by adding more gifts to it. As a gift, use your own products or additional services provided by the company. When a client asks for a discount, give him more, but for the same money. Thus, you remain in the same price range, and the client receives a gift. This could be free training, 24/7 technical support, premium service, loyalty card, free delivery, free two weeks of using something.
- Unexpected gifts. A separate technique is to generally give small but pleasant gifts to clients. Pens, coffee, candies, souvenirs and other things useful for the client. This sign of attention is very important for the sale because it creates a sense of obligation in the client. In the book “The Psychology of Influence” by Robert Cialdini, it is noted that after receiving a gift, the other party in most cases wants to make a return gift. This is called the exchange rule. And sellers take advantage of the fact that the exchange may not be equal. The value of the transaction is much higher than a package of coffee beans or a box of chocolates, but the client, having received such a gift, already feels obligated and wants to return the favor with a service for a service or a gift for a gift.
- Expertise. When a sales manager shows himself as an expert in a certain field, knows the details and can make recommendations based on his experience, this is always captivating. When the client sees that the manager is on his side and cares about his interests, the value increases. An example is a situation in the market when a saleswoman says: “the potatoes today are not very good, don’t take them, but the tomatoes are excellent.” It seems that she is not just trying to sell her product at any cost, but stands on the client’s side, cares about him, and shows respect for his choice. We trust such a seller, and next time we will come to buy from him again, knowing that he understands the product, has a full range of information on it and is on our side.
- Good job and good product. The best way to increase the value of a product is not the work of the sales manager, but the quality of the product or service that the company provides. When a product is really good, useful, convenient, people will definitely know about it. And they will come for him again. Word of mouth will begin to work, which is stronger than any manager’s presentation. Therefore, it is always necessary to start with a real improvement in product quality. Work that you are not ashamed of always sells better and brings in new clients.
- Faith in the brand. Use what you sell yourself. Believe in your product, be a brand loyalist. It is very strange to hear from a sales manager that he has plumbing fixtures at home from a different brand, and not from the one he has been selling for 10 years. The higher the trust in the manager, the more opportunities he has to influence the course of the transaction. And when a manager undermines trust through his actions, for example, by not using what he sells, the value decreases.
Example: A CRM system stores the entire history of working with clients. It is possible to listen to calls and read letters sent and received from a given client. This means that even if the sales manager who worked with a given client is fired or simply no longer responsible for this client, you can continue to work with the company without missing important details. This, in turn, means that new steps to work with the client will be correct, no mistakes will be made and it will be possible to avoid repeated ineffective actions that the manager has already taken. There is a clear saving of time when starting to work with a client, and what is most important is the ability to properly structure further work. The result of proper work is a sale - and the sale is the money that the company will receive due to such a convenient tool in the CRM system.
A very effective addition to this method is to voice just one question in the manager’s own thoughts: “so what?” The answer to this question allows you to understand whether you have identified a real benefit for the client or not. What will this product characteristic give him? Financial benefit, saving time, effort, increasing the overall level of comfort, safety, status, adding positive emotions. When you reason about specific benefits in one of these categories, you add value. This is what we need to talk about when listing the characteristics or properties of the product.
For example, indicate that it will only be available until the end of December. This is why promotions, sales, special offers, Black Fridays and Cyber Mondays are invented. The idea is not to give a discount, but to inform the client that in the future there may not be such a product at this price.
Of course, not only the sales manager should take care of this, but also all the company’s services, especially. The product must have a certain halo, it must be recognizable, famous for its quality, and be approved by society.
Enlist the support of your regular customers; most likely your new client is familiar with some of them. By calling one of them, he will receive a recommendation that will increase the value of your offer. Environmental influences always play a role in purchasing decisions. If it is considered good practice to buy these products, your chances increase. If working with “these guys” is dangerous, then the deal is unlikely to go through, no matter how much the sales manager tries to increase the value of his offer.
This includes the appearance of the sales manager, where your office is located and what it looks like, and what kind of car the director drives. Therefore, take care of your appearance and the appearance of your proposal.
Successful sales managers deliberately bring the client to their office to show that everything is in order, the office is in the center, there is money, they can work with us. And at the same time they involve the client in the work process, showing the product face to face. “This designer will work with you, and on this machine we will stamp your cornices.”
Adding value is technology
To increase the value of your offer you need to get it right. Bad work is when, by the end of the negotiations, it turns out that the sales manager has only one argument - a low price! This means he did not do his job at the proper level.
Adding value to an offer, like all other elements of selling, requires precise technology. To control the quality of work, the company must implement sales standards that would describe how to increase the value of your product. When working with clients, you can use all the obvious and non-obvious ways to add value that I described in this article.
If you are a sales manager, then this will be useful for you. Your salespeople should be able to answer 3 questions in detail:
- Why does the client need to buy this particular product or service?
- Why should a client buy a product or service from you?
- Why should the client buy this now?
It's important to remember Jack Trout's quote: "If your company doesn't have a point of differentiation, all you have to do is offer a low price." Be different. The choice is always between “being cheaper” or “better”. And the client is always weighing “what I will give” and “what I will receive.” A manager's clear vision and position, who he is and what he is doing, together with effective sales techniques, increase the value of the offer.
Therefore, when your employees say that they can only sell at a discount, it means that it’s time to start improving the quality of sales: develop arguments, implement, conduct, and implement control over the application of standards.
Efim Markovetsky, Mikhail Grafsky
Clientbridge
What distinguishes a Birkin bag from the Hermes brand from just a high-quality leather bag that you can buy in any store? This fashion piece could easily cost a whopping $22,000! However, despite the high quality of the leather and the inlay with 14 carats of gold, only the perception of its value by a potential buyer (perception of value) will be the very factor that will distinguish one bag from hundreds of the same ones.
“Birkin” emphasizes the high status of the owner and thereby evokes the respect and envious glances of other women - that intangible advantage of the product, which fully justifies its inflated price. Any other expensive bag that does not have a big name of a designer or fashion house behind it will have its own set of valuable qualities that are important to other buyers - people who value quality and are proud that they can afford such things.
This pride is part of the emotions a person feels about their purchase and which influences the perceived value of the product. The higher the perceived value, the more we are willing to pay for the product and the more satisfaction the purchase will bring.
It is quite possible to change it, and for conversion optimization specialists this value is often more important than even the value of the product itself.
You too can influence the perceived value of your product to increase conversions. Want to know how? Read on.
What is perceived value
Perceived value refers to how valuable potential customers perceive your product/service to be.
There is no deception or fraud in this. This is not due to excessive praise of the product and deliberately false advertising. (Ethics and transparency are important components of business today. This was true in the past, and in the modern world with its mobile technologies and the ubiquitous Internet, the truth simply cannot be hidden: everything quickly becomes public knowledge.)
Perceived value helps customers feel joy and excitement about their purchase and feel confident that they have made the best choice that satisfies their emotional and utilitarian needs. In addition, if the buyer is satisfied with his purchase, he will come back to you again and bring his friends with him.
Everyone wins.
But what is perception anyway? One of the dictionaries gives the following definition: “Perception is the process of knowing, understanding and interpreting something; mental reflection of the surrounding world.”
Perception is influenced by life experience, a person's personality, experience with your brand and competitors, as well as associations with public figures, movies, music, etc. Perception is very subjective. “Beauty is in the eye of the beholder”, “What is unnecessary trash for one, is an unaffordable luxury for another” - these and other proverbs are known to everyone and are extremely clear.
The way you present your product must match the perception of your target audience, their aspirations and expectations. This involves identifying their positive and negative associations, idols and icons, and those they trust.
The real value of a product, on the other hand, is a very specific value. By definition, it is the relationship between the actual manufacturing cost of a product and its retail price. This is leather quality, high quality control, and not just a tag with the name of a well-known company.
How Perceived Value Affects Sales
In 2013, Aston Martin released a replica of the Toyota Scion iQ - a small, old-fashioned car ideal for the traffic-crowded streets of the Old World. In fact, these are identical models, assembled at the same factory, by the same workers, but the Aston Martin concept cost $45,000, while the same Toyota would cost you $17,000. This state of affairs is common in the automotive industry, and it is called "badge engineering" (in this case, the automakers' trick failed and Aston Martin did not sell so well, but the trick usually works).
Using the name of an expensive brand is one of the effective ways to influence the perception of the value of a product and sell the same product, but at a higher price. The strategy is effective, but for most companies it is completely inapplicable, unless, of course, your company is a competitor to the same Aston Martin or Hermes. This is normal, but what to do in this case? Correct answer: raise the price.
Increasing the price increases the perceived value of the product
Rory Sutherland, in her TED talk, points out that perceived value is just as real to buyers as a product's objective value, and cites research that also supports the idea that buyer experience increases in satisfaction. from expensive goods also because they are expensive.
One such study, conducted by researchers at Stanford GSB and the California Institute of Technology, asked participants to taste two different types of wine—one priced at $5 and the other priced at $45 (at in fact, they were testing the same wine). The researchers found that the part of the brain that experienced pleasure became more active when recipients tasted what they thought was a more expensive wine.
Price is intangible, but it has real value—at least in the minds of buyers. Ultimately, a customer's opinion of a product's value depends on the product's ability to satisfy their needs or meet their expectations. These needs are usually emotional (rather than purely utilitarian).
The relationship between perceived value and conversion
In the 2010 book Money Makers: Inside the New World of Finance and Business, authors David Snider and Dr. Chris Howard made the following points: conclusion: “When the benefits outweigh the perceived costs, potential buyers take the target action.”
Reduce costs (not always prices) and work on the product's benefits, and you'll open the door to more conversions.
Costs and benefits are much more likely to influence purchase emotion and the perceived value of a product. And this is closely related to what people generally want.
We want to feel smart and cunning, as we do when we manage to negotiate better terms on a deal. As a rule, we feel genuine pride in our purchase and tell our friends about it for a long time.
Now let's look at ways to reduce perceived costs.
1. Selling at a low price
You can see this technique in action on the website of the American clothing retailer Modcloth in the sales section. Wardrobe items that are usually accompanied by not the most pleasant reviews: “This material seems cheap. I wouldn’t give more than $150 for this thing” - they regularly go on sale at a low price - and are sold. This does not mean that people do not want to purchase these products. It's just that their full price doesn't match the perceived value. Lowering the price eliminates this contradiction and people buy. But this is not the only and far from the best way to solve the problem.
2. Using Expectations
People may have certain expectations from a particular product. They assume, for example, that expensive products are of higher quality or that larger containers indicate more valuable contents. They trust reviews from other customers over advertisements or product descriptions, and believe that a site with real customer reviews is more trustworthy.
They think that a modern and functional website that works quickly and smoothly guarantees the high quality of the product that is promoted on it (often they are right). You can use the power of expectations to your advantage and present the product in such a way that its perceived value is disproportionately higher.
3. Reframing expenses
Cost reframing works like this: When people are told the price expressed in the smallest monetary unit, the cost of the product appears to them to be more profitable than it actually is. A study was conducted in which scientists knocked on the houses of random people and invited them to take part in a charity event by purchasing several notebooks. The first time, the researchers sold notepads at $3 for 8 pieces: this worked 40% of the time. The second time, notepads were offered at 300 cents for 8 pieces, and this approach gave a positive result in 80% of cases.
Another example might be: “For just the cost of one coffee a day, you can save the life of one child.” This proposal sounds more feasible and gentler than asking for a donation of $1,277 per year.
Car dealerships resort to this trick every day when offering leasing deals to their customers. “This car is yours for only $199 a month!” - they say. But for some reason they forget to add that this will continue for the next ten years.
More ways to change perceived value
Compare the value of a product with what is familiar to the buyer
This is one of the simplest ways to increase the perceived value of a product. Simply by placing a higher amount next to a product that you are selling for less, you make the person think that they are getting much more for that price. Please note the example below:
“We are happy to please you with a new offer that will help you save even more on your wedding. Book your wedding venue through our agency in one of the apartments offered by AMresorts and receive a free wedding package worth $4,199
Of course, such a wedding will not be free - you will need to accommodate all the guests at the company hotel. And yet the amount of the gift attracts the attention of visitors.
Showcase your skills
There is no need to rush to post an image of your product on the Internet. The experience of successful online stores suggests that these images should, at a minimum, be professional, and the site should be able to enlarge them so that the user can see the smallest details of the product.
But some sellers do not consider this approach sufficient. They go further and show their audience what happens behind the closed doors of production shops and laboratories - how a product is created. Of course, this allows you to significantly increase its perceived value, and it helps the company to differentiate itself from its competitors. Take a look at the video created by Hyundai, which aims to separate the Hyundai Elantra from the Honda Civic.
Neat style
The style of speech and even the specific words used all affect perceived value. To have a positive impact, you must understand what your target customer's desired outcome is and find the right words to describe the product. For example, a person who wants to buy a luxury Montblanc pen may pay attention to words such as “expensive” and “luxurious”, or maybe “exclusive”. These epithets describe the product, but are they suitable for the buyer?
A mother buying a school uniform for her children will not pay attention to the word “cheap”, but will be attracted by the epithet “bargain”.
It's like turning a negative into a positive. Horse traders have been doing this for many years - “vigorous” means that the horse is obstinate and will not listen to you, “safe” means that it is at least 40 years old, “not shy” means it is deaf. The general meaning is clear. It is also clear that, although you are free to manipulate phrases, if you mislead the buyer, he will not lie in his review.
Using non-round prices
Have you ever wondered why products are often offered at a price that doesn’t come at a reasonable price - their cost certainly ends at RUR X,999? Researchers from the Massachusetts Institute of Technology and the University of Chicago found that prices ending in 9 increase demand for products. In Western civilization, people read from left to right and the first numbers they see in a price lead to a distortion in their perception of it. By the time their eyes reach the last digits, their perception of the price has already been shaped by the first digits, which in turn causes them to perceive the deal as a better deal than it actually is.
The principle of scarcity
The feeling of scarcity increases the importance of the product and the expediency of its purchase, and this is also one of the 6 principles of influence formulated by the famous American psychologist (Robert B. Cialdini). Regardless of price, people are willing to purchase the latest product available just because it is the latest. Call it the scarcity effect or the fear of missing out (FOMO), but it works.
Amazon, Modcloth, Anthropologie and many other retailers are mercilessly using this principle, increasing their sales enormously. One way is to indicate the number of remaining copies next to the product.
Applies not only to physical goods. Give your users a limited-time offer that's available for the next 48 hours and you'll see a spike in conversions.
The effect of good deeds
People love to do good deeds. But the most interesting thing is that this desire can be easily monetized. AmazonSmile promises its customers to donate 0.5% of their purchases to non-profit charities. With $1000, the donation amount will be very modest, only $5, but thanks to the ingenious reframing (0.5%) it seems that the amount will be much higher.
This activity in itself serves as a source of free advertising for AmazonSmile and becomes an additional incentive to make purchases on Amazon.
Leaving a small percentage to charity is a quick and easy way to attract the attention of philanthropic buyers. But an increasing number of companies today are restructuring their own businesses to ensure stable support for the teams that produce their product. Companies like People Tree in the United Kingdom or Theo Chocolate in Seattle charge extra for using their products, and people don't mind the slight increase in price.
Identify your own value
Purple mattress has found an ingenious way to differentiate itself from online competitors and increase the perceived value of its products. First, they show the mattress production process in detail. Then they show an experiment that is as brilliant as it is absurd.
“Want a super easy way to tell if your mattress is terrible? This is called the raw egg test."
This advertising campaign quickly gained traction when people started doing this experiment in their own homes and recording it on camera. This 5-minute video demonstrating one of these experiments ultimately helped the company sell more than one such mattress (start watching at 4:40).
Does this prove that the company's products are truly comfortable? No. Does the perceived value of these mattresses increase? Yes.
Conclusion
Perceived value is an important tool in conversion optimization. It, like other factors that influence conversion rates, is based on emotions. It doesn't matter what you sell - paper clips or cars. Conversion only happens when people feel safe buying from you; when they feel like the deal is good and that your product will make their life better. Don't forget about this.
High conversions to you!
Based on materials:
The value of any product purchased by a client directly depends on the profit that its use can bring to the client, which can be accurately expressed in rubles. To understand what the value of a product is for an institutional consumer, let’s consider a conditional example of its formation. Suppose that the company produces tires and supplies them to a bicycle manufacturer. Let's say that previously it sold tires for 10 rubles per set. Now the company has mastered the production of new heavy-duty tires. The purchasing company, without making any changes to the design, can sell complete bicycles as tires adapted for difficult road conditions and charge 10 rubles more. It is quite obvious that the value of new tires for a consumer company is higher than old ones. It is easy to understand that it will be profitable for a consumer company to purchase new tires, up to a price difference with old ones - 10 rubles.
This critical boundary when the additional costs equal the additional revenues. It was her M. Porter suggested call it consumer value .
Consumer value of the product is the maximum price that the consumer considers it profitable to pay for it.
In our example, if the increase in the price of new tires is less than 10 rubles per pair, then the consumer buys a product that is of great value for him for less money. That is, the larger the gap between the purchase price of components (tires) and the selling price of the product (bicycle), the more profitable the deal is for the buyer and the stronger the desire to purchase the product.
The competitiveness of a product is proportional to the unpaid (got for nothing) part of the consumer value of the product.
The consumer value of a product is established by the fact of its acquisition. When deciding to purchase a product, the buyer first considers question about satisfying one's needs. After this he proceeds to consider prices, quality, design and other features characterizing the product and influencing its purchase.
The consumer value of a product is measured by comparison with other products. Comparison criteria can be various features that characterize the product, for example, price, quality, color, size, etc.
The setting of a price establishes the consumer value of a product in relation to other goods. The buyer's purchase of a product at a price set by the seller and preference for it over other goods determines the value it has for the consumer. As the consumer value of a product increases, its selling price also increases. If the consumer value of a product decreases, its price decreases accordingly.
Kano model
Other names of the method: “Theory of Attractive Quality.”
Purpose of the method
It is used to develop an organization's strategy and solve problems of ensuring customer satisfaction. The Kano model is one of the quality management tools.
Purpose of the method
Identification and distribution of the entire range of consumer needs (requirements) by priority.
Separation of consumer requirements into quality profile components.