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Value Marketing: How Customer Value defines Price Perception

The perceived customer value determines the price consumers are willing to pay for a product or a service.

At the same time, that willingness decides on the amount of money your business is going to make.

By understanding the technique of value marketing (or why prices are just numbers for a value) you benefit from a competitive advantage over your competitors.



Price and Value


Four Elements of Value


Create, Communicate & Retain Value


Price and Value

The ratio of price and value is the main subject of strategic price management.

It’s how customers view prices and what decides whether they will buy your product or not.

So let’s start looking at your business through the eyes of your customers.

What are the two elements of price positioning?

Price positioning of a brand consists of two dimensions: price and value.

The first dimension is the price itself. 

This monetary value is easily measurable and directly visible to the customer.

A brand should never position itself solely through price. 

Instead, value-based-marketing should include a second dimension of value.

The intangible dimension of value results from the way customers evaluate prices.

How do consumers evaluate prices?

The symbol of a scale can best describe the psychological price perception of customers

In the one weighing pan, there is the price.

A number expresses this measurable quantity.

However, without value to this price, the number is worthless.

If you don’t know what you receive for paying a sales price, you cannot evaluate if that price seems reasonable to you.

Therefore, the value is located in the second weighing pan.

Customers do not perceive prices as stand-alone, but always in relation to the value, they receive for paying the sales price.

Price and value are thus directly related to each other (also called value-pricing).

The perceived value is called customer value.

It is evaluated differently by each customer and is not measurable.

What ratio of price and value makes consumers want to buy?

Price and consumer value must be at least on the same level for customers to buy.

If the perceived customer value is:

  • higher than the sales price, customers might buy.
  • lower than the sales price, customers will not buy.

The higher the value is compared to the price, the easier it is for customers to decide to buy your product.

What’s the best way to do price increases?

As long as the perceived customer value remains higher than the sales price, customers will accept price rises.

After all, they still feel like they are receiving good value for their money.

Typically, customers accept price rises much better if an increase in value accompanies them.

In this case, they feel like they are receiving more value, which makes customer’s purchase decisions much more comfortable.

An increase in value must not necessarily accompany a price increase. As long as the value remains above the price, customers might complain, but they will still see that they are getting good value for their money.

However, if the price rises above the perceived customer value, customers will opt for a competing product.


Four Elements of Value

There are four elements of customer value that have the ability to increasing customers’ willingness to buy (and to pay).

Depending on your product, service, or price positioning, they are used with different intensity.

Value elements of a product consist of functional, emotional, symbolic, and ethical value.

1. Functional Value

Functional value is the ability of a product or service to solve a specific problem of a customer.

The functional value of a car would be, that it can bring you from point A to point B.

Functional value also includes technical specifications like how many passengers the car can bring from point A to point B or what gas mileage it has.

2. Emotional Value

Emotional value describes the feelings that are caused by a product or service

The feelings can be positive or negative and have a substantial effect on the willingness to buy.

Emotional value satisfies needs for variety, excitement, multisensory pleasure, sensual experience, or beauty.

It would be the feeling you receive from driving the car.

3. Symbolic Value

The symbolic value improves the self-esteem of customers.

Through buying a product or service, customers feel as being part of a particular group. 

At the same time, customers can also distinguish themselves from other groups. 

This belongingness or membership provides customers with social recognition and the expression of their personality. 

For both, customers are willing to pay a surcharge.

When buying a car, customers can get much value of the Mercedes-Benz or Rolls-Royce motor mascot on the front center portion of the hood.

4. Ethical Value

Ethical value conveys the moral feeling of doing something good others.

This could be another person, an animal, a community, or the environment.

Car owners of hybrid cars, e-cars, or hydrogen fuel cell cars are getting value out of the fact that their cars cause fewer emissions.


Create, Communicate & Retain Value

In terms of marketing perceived customer value, your strategy should focus on the following three tasks:

  • Create Value
  • Communicate Value
  • Retain Value

1. Create Value

The first element of your value marketing strategy should be the task of creating value.

To do that, you need to understand what drives value for your customers.

You can do so by:

  • talking to them, 
  • surveying them and
  • watching their behavior.

Once you have an understanding of the amount of value the individual components of your product or service bring to customers, you can work on increasing them.

The selection of customer segments also influences the value, as different customers have different requirements.

You can create value along with the four elements of value. For example, it could be the product quality, the selection of materials, the design of products, or innovations.

2. Communicate Value

Next, your value marketing strategy should communicate value.

This is essential because it doesn’t do your company any good if you offer extraordinarily high value, but no one knows about it.

If you want to compete in the market, you need to communicate your value in the best possible, memorable, and attractive way.

This includes information about the product, service, and brand. 

The more details, the better.

3. Retain Value

Finally, your strategy should aim to retain value.

This task is particularly important to consumers, as they want to avoid paying too high prices.

For example, when buying a car, the resale value can be a decisive purchase criterion (as well as for luxury goods).


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