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The Science of Price Perception

The Science of Price Perception

Effective pricing management requires applying principles of price perception science: how buyers react to prices and price changes and how businesses should manage price differentials. Prices as stimuli not only elicit specific emotions and frame different perceptions for potential buyers, but also send signals to competition. Businesses often have price promotions or increases without analyzing the core question of how much of a price change makes a difference to buyers. Not all price differences (or price changes) are noticed by customers. Neither do all perceived price differences induce changes in customers’ value perceptions. Considerations of the science of price perception are crucial in managing customers’ price perceptions.

Understanding the behavioral aspects of pricing is essential to building the fundamentals of perceived value pricing. Value is not absolute. What businesses need to manage is the perception of value in the minds of buyers. Perceived value pricing therefore involves the establishing, nurturing and maintaining of value perceptions in the buyer’s minds over time.

Tuesday Workshop 3 (May 1st)
Level 400 Workshop

Attendees will learn:

  • The fundamentals of perceived value pricing: how buyers respond to price stimuli and form value perceptions

  • The role of price in signaling quality and intentions to customers and competition

  • How to manage price differentials

Lillian Cheng

Partner, Cheng Monroe & Associates

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Kent B. Monroe

Partner, Cheng Monroe & Associates

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