Final answer:
Perceived-value pricing sets prices based on how consumers perceive the value of a product in comparison to its price and that of competitors' products. It incorporates the concept of present discounted value, utilizing a cost/benefit analysis to emphasize customer perception of value and utility.
Step-by-step explanation:
In perceived-value pricing, the price is set based on the value that customers realize when they compare the price and benefits of the company's product with those of a key competitor's product. This strategy takes into consideration the present discounted value of the product, a measure of how future benefits are perceived in the present time. Utilizing perceived-value pricing, companies aim to match or exceed the value customers expect from a product relative to its cost, as well as compared to competitors' offerings. Value, in this context, can be influenced by the utility and satisfaction a product provides to the consumer.
Other applications of present discounted value, which is a crucial aspect of this pricing strategy, include the evaluation of capital investments, government projects, and environmental policies, where present costs are weighed against future benefits. Present discounted value serves as an indispensable tool for analysis when considering both costs and benefits over time.
Businesses employing perceived-value pricing are effectively engaging in a cost/benefit analysis. They strive to ensure that the benefits customers perceive are greater than the costs associated with making a purchasing decision. This approach emphasizes the importance of the consumer's perception of value, utility, and worth.