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Chapter 4 - Price & Value Communication

The document discusses how to develop and communicate value-based messages that highlight the key benefits of a product in order to influence a customer's willingness to pay. It examines adapting value messages based on whether a product has high search costs or experience characteristics. The document provides a framework of four value communication strategies depending on if a product offers economic or psychological benefits and the relative cost of searching for that information.

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MARY GRACE TORALLO BINLAYO
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183 views

Chapter 4 - Price & Value Communication

The document discusses how to develop and communicate value-based messages that highlight the key benefits of a product in order to influence a customer's willingness to pay. It examines adapting value messages based on whether a product has high search costs or experience characteristics. The document provides a framework of four value communication strategies depending on if a product offers economic or psychological benefits and the relative cost of searching for that information.

Uploaded by

MARY GRACE TORALLO BINLAYO
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Chapter 4 – Price & Value Communication

– Explain how to develop value-based messages to reflect


key product characteristics
– Examine how to adapt value-based messages for
important purchase characteristics
– Show how to communicate price to positively influence
customer’s willingness to pay
Chapter 4 – Price & Value Communication

The Problem: Customer generally does not know true


value unless informed by seller.
Value communication is important when your product or
service creates value that is not readily apparent to
potential consumers.
Value communication is nothing more than information
dissemination.
• Develop value proposition (i.e., compellingly unique & distinctive
economic or psychological benefits).
• Communicate the value proposition, and
• Deliver the value.
Adapting the Message for Product Characteristics
Relative Cost of Search
Low High
“Search” Goods “Experience” Goods
Management
Commodity
Economic Benefits

Consulting
Chemicals Investment
Home
Auto Advice
Equity
Loans Repairs
Hotels
Type of Benefits

Desktop
Computers Life
Insurance
SUV’s Blood College
Antibiotics Pressure Education
Psychological Benefits

Sports Drugs
Cars
Fitness Unique work
Digital Equipment of Art
Cameras
Cosmetics
Designer Exotic
Clothes Vacations
Framework of Value Communication Strategies
Relative Cost of Search
Low High
“Search” Goods “Experience” Goods
Strategy 1 Strategy 2
Economic Value Economic Value
Economic Benefits

Communication Assurance

Communicate Communicate Assurances That


Type of Benefits

Objective Information That Differential Economic Value


Differential Economic Value Justifies Pricing (e.g., Investment
Justifies Pricing (e.g., Computers) Returns, Hotel Guarantee)

Strategy 3 Strategy 4
Psychological Benefits

Psychological End-Benefit Psychological End-Benefit


Framing Assurance

Associate Communicate
Differential Performance with Assurances That Total
Subjective Psychological Value Psychological Value
That Justifies Pricing (e.g., Justifies Pricing (e.g., Art, Exotic
Cosmetics) Vacations, Mattresses?)
Assignment
• Choose a product & identify (15 minutes)
– The target customers, the relative size of the market, and
their desired economic or psychological benefits.
– The Value Proposition for the product; i.e., compellingly
unique & distinctive economic or psychological
benefits.
– How you will communicate the value to customers
given high experience characteristics & psychological
benefits. For example, what assurances can you offer
that the product will deliver the desired psychological
benefits?
– Price & whether you will negotiate discounts.
• Communicate value & price in 2 minutes

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