Value pricing

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Value pricing is a marketing tool that bases product prices primarily on the consumer’s perception of value for a given product. The application of value pricing is an effort to satisfy consumer demand for value without decreasing the quality of the product (Hayes and Huffmann, 1995). There are several value pricing strategies that a hospitality firm can apply, such as everyday value pricing, bundling, and special offers at given times.

However, value pricing can be a risky technique if hospitality firms apply it merely as a discounting strategy in order to increase their market share, hoping to achieve a profit with increased sales volumes. In order to make value pricing a financial success, hospitality operators have to learn what represents value in their customers’ minds and set prices accordingly. Value pricing strategies ideally are based on knowledge of how relationships between price and quality affect perceptions of value. These relationships can be investigated by applying Price Sensitivity Measurement (PSM) techniques. The results then can serve as the basis for successful value pricing, as was demonstrated by Taco Bell who created its very successful 59 cents value menu based on such an analysis (Lewis and Shoemaker, 1997).

References

Hayes, D., & Huffman, L. (1995). Value pricing: how low can you go? Cornell Hotel and Restaurant Administration Quarterly, 36(1), 51 56.

Lewis, R., & Shoemaker, S. (1997). Price sensitivity measurement: a tool for the hospitality industry. Cornell Hotel and Restaurant Administration Quarterly, 38(2), 44 54.

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