Relativity in Pricing

Effective pricing management must consider how customers develop value perceptions. Such an approach, which we label proactive pricing, is more difficult than adding a profit margin to cost estimates. Nevertheless, the ability to make effective pricing decisions is substantially enhanced by taking this approach. To understand how customers form value perceptions requires examining how people perceive prices, price changes, and price differences. Drawing on a rich heritage from...
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Effective pricing management must consider how customers develop value perceptions. Such an approach, which we label proactive pricing, is more difficult than adding a profit margin to cost estimates. Nevertheless, the ability to make effective pricing decisions is substantially enhanced by taking this approach. To understand how customers form value perceptions requires examining how people perceive prices, price changes, and price differences. Drawing on a rich heritage from behavioral price research and augmenting that information with emerging developments from behavioral economics, this book summarizes current evidence on how buyers perceive, process, retrieve and use price information. This evidence will be translated into implications for pricing managers. We will provide numerous practical examples, analytical techniques, and practical pricing research methods for understanding the relationship between price information and customers' value perceptions.