Chapter 4 – Price & Value CommunicationChapter 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

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.

Chapter 4 – Chapter 4 – PricePrice & Value Communication & Value Communication

Relative Cost of SearchT

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Econ

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Psyc

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SportsCars

SUV’s CollegeEducation

InvestmentAdvice

ExoticVacations

HomeEquityLoans

Antibiotics

DigitalCameras

DesktopComputers

CommodityChemicals

AutoRepairs

LifeInsurance

BloodPressureDrugs

ManagementConsulting

Cosmetics

Hotels

FitnessEquipment

High “Experience” Goods

Low“Search” Goods

Adapting the Message for Product Characteristics

DesignerClothes

Greater Price

Dispersion

Unique work of Art

Strategy 1Economic Value Communication

CommunicateObjective Information That Differential Economic Value

Justifies Pricing (e.g., Computers)

Strategy 2Economic Value

Assurance

Communicate Assurances ThatDifferential Economic Value

Justifies Pricing (e.g., Investment Returns, Hotel Guarantee)

Strategy 3Psychological End-Benefit

Framing

Associate Differential Performance with Subjective Psychological Value

That Justifies Pricing (e.g., Cosmetics)

Strategy 4Psychological End-Benefit

Assurance

CommunicateAssurances That Total

Psychological ValueJustifies Pricing (e.g., Art, Exotic

Vacations, Mattresses?)

Eco

nom

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Psy

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High“Experience” Goods

Low “Search” Goods

Relative Cost of SearchTy

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Framework of Value Communication Strategies

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