A common misconception in pricing is that buyers are really that fixated on prices to begin with. It’s easy to come to that conclusion since almost all pricing related news focuses on prices–that is, which grocery chain has the lowest prices or which construction company was able to give the lowest price on a government infrastructure project. In the case of public entities, offering the lowest price might be the way to go. However, even in those cases, the lowest price is often not the best fit for the customer.

In the modern world, one product or service doesn’t fit all. Through global markets, buyers have a wider selection of options. Due to this, companies also need to specialize and create products to fit specific market segments or target audiences.

Price is a strong signal of the position of your product or service on the market. It can help buyers understand if you are selling a generic product, a specialized product, or a premium product.

But What Is the Difference Between Price and Value?

Understanding the difference between price and value is imperative for making pricing decisions. According to Zeithaml (1988), price is the thing that you’re giving up or sacrificing to gain access to the wanted product or service. While in the modern world, it most often is money, sometimes prices can also be paid in other ways than money.

On the other hand, value is the understanding of the benefits of the product or service in relation to what is being given up or sacrificed (Zeithaml, 1988). Essentially, value is a comparison between the benefits and the price of a product or service. Benefits can vary significantly based on the buyer in question–some value quantity, some high quality, and others ease and convenience.

Should I Be Selling Price or Value?

Buyers often mix up price and value. It’s not natural for people to process information with a lot of effort, so we easily mix up the terms we are using. When we buy things, we might rationalize the purchase by saying that it was a “good price”. When we don’t make a purchase, we often forego it because “the price is too high”.

Typically, “good price” is code for “good value for money” and “too expensive” means “too much money for the benefits we are getting”. Therefore, the role of the seller is to understand what is the motivator of the buyer that they are targeting. In simple terms: if the buyer is not interested in premium features, the product that seller promotes should have less features and a lower price. Instead, if the seller consistently just lowers the price of a premium product to please customers, this tends to destroy the price perception of the product in the long term.

Customer Targeting: Is the Bull's Eye "Good", "Better", or "Best"?

The ambition of targeting is to understand what the typical features and price ranges of products in the category are for good products, better products, and the best products. When a customer complains about the price of a product, the seller should aim to understand if they are interested in “good”, “better”, or “best”. After that, it’s much easier to offer a product that fits their perception of the value.

Focusing too much on convincing our customers of a low price can actually end up making them more price sensitive. As sellers, we should focus on presenting the benefits that our product or service is producing. This way, we can amplify that our product or service is “good value for money” for our target customer, and fits their product requirements–that is, whether the product is "good", "better", or "best".