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
Economic Benefits
Psychological Benefits
Type of Benefits
Low
“Search” Goods
Commodity
Chemicals
High
“Experience” Goods
Home
Equity
Loans
Auto
Repairs
Desktop
Computers
SUV’s
Antibiotics
Sports
Cars
Digital
Cameras
Cosmetics
Management
Consulting
Investment
Advice
Hotels
Life
Insurance
Blood
College
Pressure Education
Drugs
Fitness Unique work
Equipment
of Art
Designer
Clothes
Exotic
Vacations
Framework of Value Communication Strategies
Economic Benefits
Psychological Benefits
Type of Benefits
Relative Cost of Search
Low
“Search” Goods
Strategy 1
Economic Value
Communication
High
“Experience” Goods
Strategy 2
Economic Value
Assurance
Communicate
Objective Information That
Differential Economic Value
Justifies Pricing (e.g., Computers)
Communicate Assurances That
Differential Economic Value
Justifies Pricing (e.g., Investment
Returns, Hotel Guarantee)
Strategy 3
Psychological End-Benefit
Framing
Strategy 4
Psychological End-Benefit
Assurance
Associate
Differential Performance with
Subjective Psychological Value
That Justifies Pricing (e.g.,
Cosmetics)
Communicate
Assurances That Total
Psychological Value
Justifies Pricing (e.g., Art, Exotic
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