In perceived value pricing method, price is set based on the customer willingness to pay and what he thinks about the product. The value is decided on factors like product experience, support to service, warranty, reputation, trustworthiness etc.
Company explains its customers about their offerings, product aspects, services and asks them to evaluate the price. This method measures accurate market perception.
The formula for perceived value pricing method is as follows −
PP = PV * K
Here PP = Product value, PV = Product Perceived value, K = Adjustment factor
The advantages of the perceived value pricing method are as follows −
The disadvantages of the perceived value pricing method are as follows −
Function − Customers can accomplish with firms or organizations with their product/service. Let's say, a product of an accounting service firm removes the customer's administrative burden (related to taxes).
Features − functions are implemented. Let's say, an accounting service firm provides a service which helps small businesses in generating monthly reports and estimates quarterly or annual taxes.
Visual Appeal − visual impact of product/services. Let's say, a visual of a newly launched mobile phone.