PRICE TO VALUE

BA 03 Chapter 4
Prepared by: Cheryl Y. Dulay
 PRICE-TO-BENEFITS MAP
• are positioned
according to their
perceived prices on the
vertical axis against their
perceived benefits on
the horizontal axis.
• It is a visual
representation of how
customers perceive the
value tradeoffs.
Price-benefit positioning map
• shows the relationship
between the
primary benefit that a product
provides to customers and
the prices of all the products
in a given market.
 DRAWING POSITIONING MAPS

1. Define the market

• First, identify the consumer needs you wish to
understand. You should cast a wide net for
products and services that satisfy those needs, so
you aren’t blindsided by fresh entrants, new
technologies, or unusual offerings that take care
of those needs.
• Second, choose the country or region you wish
to study. It’s best to limit the geographic scope of
the analysis if customers, competitors, or the way
products are used differ widely across borders.
Finally, decide if you want to track the entire
market for a product or only a specific segment,
if you wish to explore the retail or wholesale
market, and if
2. Choose the price and determine the primary benefit
• You have implicitly decided whether to study retail or wholesale
prices when you chose which market to focus on, but you must also
consider other pricing parameters. You must choose whether to
compare initial prices or prices that include life cycle costs, prices with
transaction costs or without them, and the prices of unbundled or
bundled offers. These choices depend on the yardstick that
customers use in making purchasing decisions in the market under
study.
• Identifying the primary benefit—the benefit that explains the largest
amount of variance in prices—can be complicated. A product offers
several benefits: basic functions, additional features, durability,
serviceability, aesthetics, ease of use, and so on.
3. Plot positions and draw the
expected-price line
the line that best fits the points on the map.
The line shows how much customers expect to
pay on average to get different levels of the
primary benefit.
In addition, the line’s slope tells us how much
more a customer is likely to pay for a higher level
of the primary benefit.
You can find the line that best fits the data by
taking the slope associated with the portion of
the price-benefit equation that links the primary
benefit to prices.
 PRICING AREAS
• Value Equivalence Line –
where price increases
proportional to benefits
increase
• Value Advantaged – excess
benefits beyond what is
captured in price
• Value Disadvantaged –
priced higher than what
would be justified based on
the measure of benefits alone
 VALUE EQUIVALENCE
LINE
the perceived price
against perceived
benefits of products
are positioned along a
line
 A man goes into a dealership to buy a Rolls-Royce. He
perceives there to be many benefits associated with the car and
these he believes are justified by its high price.
Another man goes into a dealership to buy a Ford car. He too
has a perception of the value of that car and in his mind it is priced
appropriately.
Yet another man goes into a dealership, this time to buy a Kia
car. He perceives the price and the benefits to be just right for him –
indeed it is why he has chosen that particular brand.
These individuals perceive their cars of choice to give them
benefits appropriate to the prices even though they are quite
different.
If we were to plot the brands on the perceived prices and
benefits, they would sit comfortably on a line that bisects both – we
call this the value equivalence line (VEL).
Source: https://www.b2binternational.com/publications/importance-value-equivalence-line/
DISPERSION IN
PERCEIVED
PRICE

Dispersion in
perceived price
can be driven by
strategic and
tactical variations
in price or misper-
ceptions of price
 DISPERSION
IN
PERCEIVED
BENEFITS
Dispersion in
perceived
benefits can be
driven by
different
segments placing
different
importance on
different benefits,
or misperceptions
of benefits
delivered
UNCERTAIN
VALUE
PROPOSITION
NEUTRAL PRICING PENETRATION PRICING
• initially offering low prices to attract customer, increase sale
and positive brand image especially for the newly
developed products and services.
• Penetration pricing strategy is a price war between rivals in
the industry where every company wants to cut the prices
and remain the lowest in the market to capture the market
share and develop customer loyalty.
NEW PRODUCT POSITIONING
PRICE
SKIMMING
Price Skimming
https://www.investopedia.com/terms/p/pric
eskimming.asp

• a product pricing strategy by which a firm

charges the highest initial price that
customers will pay and then lowers it over
time.
• As the demand of the first customers is
satisfied and competition enters the
market, the firm lowers the price to attract
another, more price-sensitive segment of
the population.
• This approach contrasts with the
penetration pricing model, which focuses
on releasing a lower-priced product to
grab as much market share as possible.
 Conclusion
• Price should reflect value
• Any pricing move, will take share
from other products that are near the
new pricing position on the price to
value map
• Price neutral positioning posses the
fewest competitive threats
• Value Advantaged Positioning
imposes a threat on competitors
• Value disadvantages positioning
challenges the need to capture
customers
• Customer may uncertain regarding
your price position
End