Pricing the Perceived Value Gap

Cost basis tends to get the most attention when it comes to pricing. I remember from business classes in college would spend endless hours on cost plus pricing, margins, and so on. However, perceived value—the difference between the price and what people think it’s worth—gets overlooked. If the perceived value is high relative to the price, it a no-brainer to buy.

The set of features and the price establishes the perceived value. What you get for the price and how you describe it to prospective customers does much more to increase perceived value than lowering the price. Another way to increase perceived value is with add-ons that are priced independently (e.g. phone support $x/month) helps assign a value relative to the bundled price.

Read Three Ideas on Pricing.

See also:

• Versioning provides a way to sell information without cannibalizing high margins
• Willingness to pay should be at the core of product design
• Is your pricing too high?
• Monetizing Innovation