What Is a Value-Pricing Strategy?
Value-pricing strategy is a term that is used in reference to the strategic methods utilized by businesses in the marketing of their products. IIn the case of value-pricing strategy, it is just one of several methods of pricing strategies that businesses can use to effectively market their products. This method of pricing works by assessing a potential or already existing market and assigning a value to a product aimed at that market based on the result of an analysis of the value of the product or service the company is selling to the target market or consumers. That is to say that the product is not priced based on the calculation of the usual parameters for allocating a price to a product, including the cost of production and the inclusion of profit. For the value-pricing strategy, the allocation of the product price may be completely disproportionate to the cost of production or service, but its value will be derived from whatever the target consumers feel about the product, or whatever they are led to believe the product is worth through marketing campaigns by the company.
As such, the same product might be priced differently for varying markets based on the assessment of the various markets under the value-pricing strategy. The determining factor for assigning the value to the product under the value-pricing strategy might be the perception by the target consumers that the product or service contains an element or brings a new dimension to that category of goods or service that is lacking in other products. It may be the consequence of a deliberate attempt by the company to create an impression among consumers that the product or service is more valuable than in it actuality.
This application of value-pricing strategy is common in the fashion industry where articles of clothing are sold at exorbitant prices that are beyond the cost of production or the workmanship that goes into the creation of the items. The main reason why some products in this industry tend to be more expensive than other products of comparable, or even better quality, is the result of the sentimental attachment to the brand behind the label and the value that such a brand attracts. As such, the company could produce a plain piece of paper and sell it for far more than an entire box of books due to the value that the customers have ascribed to the brand.
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