Are you giving ‘Value for Money’?

The balance between actual price and quality perceived by customers of your product depends to a great extent on your specific business strategy.
rapporto qualità prezzo
How can prices be maximized?

The balance between price and quality is essential for any business. Once you know your minimum price, you might think that offering the product at the highest possible price is enough to maximize your earnings. The truth is, in terms of price and quality, not always the quality perceived by the customer is what we expect.

As a result, the best price cannot be based solely on internal data as this will be inaccurate. Which is the best price to apply is by no means an easy question to answer as it depends on a specific strategy which needs to take into consideration the value which the customer associates with that product.

Identifying the actual price and perceived quality

First of all, we have to put aside the concepts of price and quality and acknowlege those of actual price and perceived quality.

The actual price is the actual selling price without discounts or special promotions and depends on the production processes of the company. The perceived quality, however, is what the customer thinks of the product offered by the company. The perceived quality, therefore, is determined by asking customers directly what they think of the product in question

Only when you correlate these two variables, will you have an accurate scenario, which will help you to understand on which variable to act depending on how you want to position your product.

4 possible scenarios of actual price ratio and perceived quality

Price and quality can be perceived as low or high. Where they intersect can be summarized into 4 main scenarios:

  • Low price and perceived low quality: the product is bought because it has a competitive price but if it fails to reach the expected level of quality the customer will buy it only once and will not recommend it.
  • Low price and high perceived quality: the customer will be satisfied because the perceived quality is very high in exchange for a low price. The company, however, will need to raise the price if it wants to stay in the market.
  • High price and low quality perceived: the customer feels that he is paying too high a price for the quality perceived. The best strategy would be to increase the quality perceived. This can only be done once there is data regarding where the customer attributes value to the different components of the product.
  • High price and high quality perceived: it is the ideal scenario for the company that increases the price because the customer is willing to pay for a product that he considers to be of high quality.


What is the best way to determine perceived quality?

First of all, we need to know the actual price the customer would be willing to pay for the product, this is done by measuring the perceived quality. Those who start from ‘low quality’ have every interest in increasing the quality perceived because only then can they increase the price, if it is too low, or continue to ask for a high price because it meets nevetheless specific customer demands.

The downside is that customers are not always willing to give feedback directly to the company. The most effective way to obtain genuine, therefore valuable, feedback from the customer is to contact a specialist in customer value.

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