It’s 2021, and customers want companies to be authentic about their values. These values drive an organization’s business and communicate its worth to the consumer market. Value-based marketing enables businesses to gain their audience’s trust by being honest, authentic, and accountable. This trust allows companies to offer a better customer experience by establishing a healthy relationship. This marketing strategy connects with your customers’ ethical values instead of adopting a product-centric approach.
Setting up value-based pricing
Companies that have adopted a value-based pricing approach rethink how a customer will perceive the product’s value. In this marketing strategy approach, marketers set prices based on how much consumers believe a product is worth, i.e., its value. How do you determine the perceived value of your services/products? Marketers perform immaculate analysis to set value-based prices. We’ll explain the strategies of setting up value-based pricing below:
- Research your audience:-
When you’re competing with several companies, the target audience will determine your products’ perceived value. That’s why value-based marketing research begins with your niche. Undoubtedly, your price point depends on your consumers’ willingness to pay. Therefore, the amount they’re prepared to spend on this product will determine its actual value in the eyes of your target audience. This research will include qualitative and demographic information you’ll acquire after interviewing customers.
- Create buyer personas:-
These avatars serve as hypothetical representations of your average customer. A buyer persona isn’t just a sketch but includes the relevant information you require to deal with an ideal consumer. The data you collect from surveys and interviews provide the necessary information the marketers need to make these avatars as specific as possible. How does your ideal customer respond to discount offers? What other products is he/she interested in buying? You can use online tools to create fine questionnaires.
- Market your product:-
The next step involves marketing your product based on its perceived value. A key to your marketing strategy is recognizing that the internet is a vast and lucrative platform for promoting your products. There are different lead magnet examples you can try for an effective marketing campaign. However, like your products, they should also provide optimum value. They must also be easily accessible while furnished with CTAs to enhance customer engagement. Marketers often experiment with the good-value pricing strategy. They focus on the product’s different benefits since these features add to the product’s value. Comparatively, the value-added pricing strategy concentrates directly on the product’s perceived value. Revisit “Maslow” s Hierarchy of Needs” to get ideas for justifying overpricing.
- Research your competitors:-
Contrary to what some marketers believe, your product doesn’t have an absolute value. It only has a perceived value relative to the industry. So, you can’t sell a handbag for $1,000 if your competitors are selling it for less unless you can justify overpricing. If you fail to provide enough value, the audience will switch to other affordable options. So, it’s essential to ask yourself specific questions about why your product deserves the pricing you’ve set. These queries include:
- Does your product last longer than the cheaper alternatives?
- Do the materials you’ve used in manufacturing contribute to the quality?
- Does it offer customers more and better features (thereby justifying overpricing)?
- Conduct competitor analysis:-
A competitor analysis as part your marketing strategy planning ensures that you’ve determined your product’s actual value correctly. Moreover, if you’ve introduced something new to the market, you probably lack the resources to conduct the required customer research. So, you can examine your industry rivals to see if they created a similar product. Conducting a competitor analysis also helps you realize whether you should stick with a value-based pricing model or switch to a competition-based marketing approach.
Advantages of value-based marketing
Value-based marketing has distinct features that make it more attractive for marketers than traditional advertising methods. However, it’s more difficult to process than cost-based pricing. It’s harder to justify your product’s perceived value than its apparent price. Therefore, unless your product is unique from a competitor’s products, its perceived value won’t remain stable. Your limited niche will shrink since you’re aligning yourself to specific ethical standards. It takes time and resources to survey your target audience and examine how they perceive your brand. But, when executed correctly, this research will help you generate a better profit margin. Here are more benefits of adopting value-driven marketing:
- Market penetration:- Value-based marketing enables companies to enter previously untapped markets where they had no customer loyalty before.
- Customer perception:- Customers tend to perceive costly objects as extravagant and hesitate to purchase luxury products. But adding value to the item ensures consumers that they’re buying something neither cheap nor expensive instead of a moderately-priced product.
- High-quality products:- The feedback you receive from your audience helps you create better and high-quality products. Since the products’ perceived value depends on multiple factors such as their quality, and these high-quality products translate to more loyal customers.
- Customer service:- Value-based marketing involves collecting information after interviewing the consumer market. It further leads to companies providing considerate customer service to their target audience since you establish a bond of trust with your target audience.
- Customer loyalty:- Creating quality products and catering to your target audience’s needs ensures customer A better consumer experience with your brand earns you the loyalty of your niche since you’re now justifying the perceived value attached to your products.
- Brand value:- Value-based pricing establishes your brand since you’ve committed yourself to promote specific values precious to your target audience. By putting these morals first, you find a unique value for your brand. This value helps develop a long-term relationship with your niche.
A modern-day business seeks USPs (unique selling propositions) to differentiate itself from rival brands. Value-based pricing bears a customer-centric approach instead of a product-centric one since you appeal to your audience’s ethics and values. Promoting these morals aligns you with a particular movement that makes your brand relevant to your niche. For example, the younger generation has become conscious of the corporate sector’s impact on the earth’s climate. So, brands produce “green” (eco-friendly) products to get inside the audience’s good books. That’s how value-based marketing makes your target audience pay attention to your brand instead of your competitors in the industry. It’s a critical part of your marketing strategy.