Value-pricing Strategy: Were not The Cheapest but...

In this highly competitive online marketplace, it can be difficult to persuade customers to buy from you when you offer a similar product to your opposition but with a higher price tag. And trying to beat competitors on price alone is a cut-throat business, very risky and not recommended. It attracts bargain hunters ready to defect to competitors for a better deal.

Using a value-pricing strategy is a better proposition because it attracts loyal customers. Why do customers buy designer-labelled clothes and luxury cars? Why are those items more expensive when they don't cost so much more to make? The answer lies in the perceived value. Value is not an inherent attribute of the product but it commands a higher price.

Customers do not buy features and benefits, they buy VALUE.

Value is subjective. Value is a benefit but a benefit is not necessarily of value to all customers. For example, a vendor offers free installation and free updates for his software. Customer-A considers "free installation" as "value"' because he has no technical knowledge and this will save him time and effort. Customer-B rates the free installation as "nice to have" but the drawcard or "value" is the free updates that will save him money in the long run. Customers do not assign value to the same benefits.

Behind value-pricing strategies there are a few important concepts:

  • Customers are value conscious rather than price conscious e.g. some customers will pay extra for prompt delivery.
  • Customers assign a personal value to a product or service e.g. a teenager is willing to pay a premium price for a concert performed by his idol.
  • The selling price is based on customers' perceived value rather than on the vendor's costs e.g. an ebook costs less to produce than a paperback but readers will pay more for it because of the value placed on format and instant delivery.

When customers evaluate competing products, they are usually comparing value. To increase the value of your products, you can either add benefits or reduce the perceived risk factors rather than resorting to reducing your price.

Adding benefits
Value-added benefits do not replace comprehensive product information but are complimentary strategies to help converting website visitors into customers and giving you the competitive edge. Try these value-pricing strategies:

  • Special packaging e.g. recyclable containers, gift wrapping with card
  • Package deals (for convenience) e.g. bundles, "all inclusive" value pack
  • Fulfilment options e.g. "white glove" delivery service, instant download
  • Payment options e.g. monthly and yearly plans
  • Free training material e.g. online manual, video, audio
  • Personalised service e.g. "I oversee each account"
  • Free product updates or refreshers (for courses)
  • Bonus offers
  • Certification e.g. licence, training certificate

Reducing perceived risks
For new customers, there is always an element of risk in purchasing from a new vendor, especially over the internet. These are examples of value-pricing strategies to boost confidence and credibility:

  • A professionally designed website
  • Free trials or samples
  • Extended warranty option
  • Free after-sales service
  • Your credentials, length of time in business, list of important clients
  • Guarantees of satisfaction "100% satisfaction guarantee"
  • User-friendly privacy, security and refund policies
  • Testimonials, endorsements, reviews
  • Easy access with contact options e.g. toll free number, chat live

Naturally, everyone loves value for money but does not necessarily want the cheapest option. What value do customers perceive in your product and how much are they willing to pay? Value comes at a price!

Next time you consider reducing your selling price, think value.
"We're not the cheapest but...we offer value."

© 2005 Henriette Martel-Lawson

Henriette Martel-Lawson, author of "200 Marketing Ideas for Your Website", is a website strategist who helps businesses develop or convert a stale website into an effective marketing tool. Henriette is the founder of Marketing Cues, an internet marketing resource centre providing articles, reviews, free tools and lots of tips. Receive a free ebook when you subscribe to bimonthly WEBmarketingcues newsletter at http://www.marketingcues.com

More Resources

Unable to open RSS Feed $XMLfilename with error HTTP ERROR: 404, exiting

More Branding Information:

Related Articles

Brand Identity Company - Brand Identity Guru
Hiring a brand identity company is very important. In every marketing campaign, your company should have a solid brand identity on which to hang its hat.
Could Ray Kroc have founded McDonalds in the Era of Sarbaines Oxley?
Over regulation of our free markets is stifling our growth in America and killing the next superstar Entrepreneurs. Let's discuss just how bad it really is.
Build Customer Loyalty by Promoting Your Customers
Do you want to attract new customers while building greater loyalty among your current customers? Include your customers in your marketing and promotions. By creating greater awareness of your customers (and their businesses) you may help to build their businesses and increase their demand for your products and services.
Your Small Business Name -- Important?
You bet a name is important. Many small business owners try to come up with a clever name for their business rather than one that explains what they do.
Branding: What Not to Do
Here's a little story about what not to do as you carve out a name for yourself in the world of internet business.Don't use a miscellaneous email account as your primary web contact address.
Franchising is Virtually Fraud Free
The number of complaints to the Federal Trade Commission on Franchising do not indicate ramped fraud in the franchising sector. The FTC before Congress gave a report showing that the number of complaints was fewer than one tenth of one percent, lower than any other industry.
Is Your Logo Helping or Hurting Your Business?
The quality of your logo can mean the difference between success or failure. It can be that simple!Trademarks and Logos make up the most international language in the world.
Eye On The Pie: Branding From an Investors P.O.V.
When building a business as a brand it's important to avoid a myopic view and consider another important aspect of the business game as well-- investing. After any amount of toil and hard work to create a valuable product, service or company the big game is when you go public-- when money-minded people want more, they want a piece of your brand pie.
Is It Legal? - Indecent Naming With Tradition
When Mitsubishi launched a new car with the name "Pajero" on the Spanish market, it became obvious very soon that the name chosen was not optimal because it immediately was the subject of jokes due to its homophony with a Spanish expression related to masturbation.The same happened to Ford's model "Pinto" (Portuguese for male genital) in Brazil where it was quickly renamed into "Corcel"(horse).
Extreme Makeover - Small Business Edition
Have you ever watched one of those home makeover shows? You know the scenario. The homeowners have decorated or remodeled their house all by themselves.
Picking The Design Company Which Is Right For You
So you've decided to go for it-you're ready to choose a design company to create your logo and other marketing materials. It seems easy enough.
Go Ask Alice
One of fiction's finest marketing minds, The Cheshire Cat,once told Alice in Wonderland something all business ownersand marketers should remember:"If you don't care where you are going, it doesn't make adifference which path you take."For businesses bent upon success, it does matter which pathyou take.
Logo Design - Corporate Identity Branding - Brand Identity Guru
Like it or not it's who you are. Your corporate Identity touches all aspects of your business and plays a vital role in your customer's overall feeling with your organization.
Branding Fiasco -- Better Be Who You Say You Are!
Our experience as customers offers great instruction into the concept of branding. Come with me on a recent "experience" and you'll see what I mean.
Logo Files: Versions Of Your Logo That You Should Own
Your logo is the most important graphic element in which you will invest for your business. You should own the logo in many file formats.
Brand Awareness - Brand Identity
About once a month a few of us at the office get together during lunch for what has become known as a SWAP meeting. We share thoughts, stories and sometimes play Pictionary.
Attract More Clients With A Brand Identity
You've probably heard that people buy products and services from people they know, like and trust. And, as I have done, you've probably wondered how you can foster more of this "Know-Like-Trust" factor in your business relationships.
Build Brand Identity Through Product Branding
Building a product into a brand leader is not easy, but I truly believe that you can improve your branding impression if you follow these 2 rules; Passion & Consistency as well as the 4P's of Branding that I have developed, PRODUCT - PLACEMENT - PROMOTION - PEOPLE. These 4 P's will enable you to check the way your brand is interpreted.
Good Logos Make Great Sales Tools
Every day, the average person is exposed to millions of visual stimuli including hundreds of company logos.A logo is a unique visual image that represents a company or its products.
Quality and Service - Yeah, Right!
One of the critical drivers of business success is having a unique competitive advantage. Most managers understand that to attract a larger share of the market, or find enough customers prepared to pay a premium price, they must provide something of greater value than their competition.