Economic and Perceived Value Pricing

Reflection of prices

Pricing strategies are essential for both goods and services because they determine the income and profitability of a business establishment (Kotler, 2011). I think that prices should either reflect the cost of making the product, as suggested by the economic pricing approach, or the perceived value, as suggested by the perceived value pricing strategy. The final price of a good or service should be determined by the level of competition and production cost (Kotler & Keller, 2012). For example, if the cost of production is relatively high, then the price of a product should be set to reflect the cost of production and the profit margin. However, this should take into consideration the prices charged by businesses offering similar products. On the other hand, a product or service that is characterized by low competition should adopt the perceived value pricing (Kotler & Keller, 2012).

Advantages and risks of economic pricing

I think that the economic pricing strategy has advantages to both the consumer and manufacturer of a product. First, consumers are charged the best prices, which are based on the production cost of a product. This ensures that firms provide products at very competitive prices. Second, the pricing approach gives companies good chances of offering products at relatively lower prices in markets characterized by high levels of competition. Third, a firm could utilize the sales of products based on the economic pricing to decipher customer dynamics and factors that should be used to reduce the cost of production. However, the pricing strategy presents two main threats to a firm. For example, a firm could incur losses if it offers products at prices that are lower than the cost of production due to increased product competition. Also, the approach offers limited opportunities of growth because of limited profits.

Advantages and risks of the perceived value pricing

I believe that this approach offers the best opportunity for a firm to maximize its profits. This is one of the best advantages of perceived value pricing, which does not depend on the prices charged by other firms. Also, companies use responses from consumers to set prices of products. In addition, perceived value pricing affects marketing positively by setting prices of products based on the amount of money that buyers are willing to pay. The amount is anchored on the premises of the perceived value of a good or service. However, the pricing approach might result in lower sales of goods and services because consumers might feel that they are being overcharged (Kotler & Keller, 2012).

Implications of the approaches when crafting a marketing strategy

The perceived value pricing and economic pricing have important implications for marketing approaches that are crafted by marketing teams of business organizations. The pricing models impact how marketing of products is carried out. It could be carried out on the grounds of competitive prices, anchored on the economic pricing, or on the premises of promoting product sales due to its perceived value, as proposed by the perceived value pricing strategy (Kotler & Keller, 2012).

The approaches for products and services

I think that marketing teams use the economic pricing when they are marketing a product because its cost of production could be easily be determined by consumers. For example, it is quite easy to predict the cost of production, and its final retail price, of a loaf of bread (Kotler, 2011; Kotler & Keller, 2012). On the other hand, the perceived value pricing is adopted when marketing a service because it could be difficult to assess the cost of producing a service. For example, consumers cannot easily tell the final charge of repairing electrical appliances.


Kotler, P. (2011). Reinventing marketing to manage the environmental imperative. Journal of Marketing, 75(4), 132-135.

Kotler, P., & Keller, K. (2012). Marketing management. Upper Saddle River, NJ: Pearson Prentice Hall.

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