- There are abundance of literature and articles which are actually forming the relationship among the perceived pricing and its competitiveness. Organizational planners are still in the process of considering economic approach or perceived approach while estimating the pricing of a product (Wilkinson, 2005). In my view, organizations have to use the perceived value approach or strategy to set the prices of their products, because required profit margin should be added in the cost of making the product to earn economic profit, otherwise companies would have operating on the breakeven, or may incurred economic loss. Approaching the perceived value strategy would be more worthwhile for a company, as compared to the traditional economic approach, if they really want to flourish their economic belongings and activities.
- There are some advantages and risk pertaining to both of these approaches and the same are mentioned below
- For Economic Approach: In the economic approach, organizations only consider the in line or direct cost of the product making, through which they can overcome on the direct cost (Advantage), but they cannot drag them under the ambit of economic prosperity because they will remain at the point of breakeven (Risk) (Garbarino & Lee, 2003).
- For Perceived Value Approach: While considering the perceived value approach, an organization includes the direct cost of making the product along with the profit margin, through which an organization would earn economic profit for sure (Advantage), but it may increase the final cost of a product which may divert the minds of the consumers in consuming the product (Risk)
- If we are marketing a services, then we have to use the pure play method in which we could examine the cost of the services of our peer companies and then applied out required profit margin into it and then present the same in front of the customers, which would be a perceived value, but if we want to compete with the peer companies, then we have to use the same costing approach. Let’s say we are giving audit services, then we have to find similar companies which are giving the same sort of services to both domestic and international clients, and then we have to compute our required profit margin which should have been added in the perceived cost to come up with an effective perceived pricing strategy.
References
Garbarino, E. &. (2003). Dynamic pricing in Internet retail: Effects on consumer trust. Psychology & Marketing. Economics Journal , 495–513.
Wilkinson, N. (2005). Managerial Economics: A Problem-Solving Approach. New York: Cambridge University Press.
