The Customer Defined Value Matrix Explained

Customer Defined Value Matrix Image

The way that each company sets a price for goods and services is as customized as their unique selling proposition. There are three basic pricing routes that brands pursue in open markets: high-end (skimming), competitive pricing, or low-end (penetration pricing).

Pricing structure for most products and services can be complicated by the following factors, which are part of the Market Opportunity Analysis for product and service pricing:

  • High fixed costs
  • Standardization of products or services (products such as commodities and utilities, and services like credit cards or cable providers where the basic service is standard)
  • Number of competitors in the market
  • Likelihood of customers to make the product or perform the service themselves
  • Customer’s price sensitivity
  • Targeted consumer segment, their ability or willingness to pay for goods and services
  • The brand’s existing pricing strategies and brand equity
  • Basic supply and demand fluctuation in markets
  • The customer defined value matrix

The customer defined value matrix is basically a consumer segmentation tool. I like it because I believe that demographics are outdated and that a priori systems sensitive to the wants, needs, and perceptions of consumer groups are more equipped to handle today’s highly fragmented consumer driven marketplace.

The matrix helps you identify ways your customers interpret the value-price ratio. There are different strategies to appeal to different groups:

Value is low price:

  • Discounting
  • Odd-number pricing
  • Penetration pricing

Value is everything I want in a product or service:

  • Prestige pricing
  • Skimming

Value is the quality I get for the price I pay:

  • Value pricing
  • Price/Quality as a cue

Value is all that I get for all that I give:

  • Price framing
  • Price bundling
  • Complimentary pricing

There are methods of differentiating prices once established within each category, these are some of the basics:

  • Unbundling prices
  • Delayed quote price (B2B)
  • Escalator clauses (introductory rates)
  • Reduction of discounts

In general, all set prices fluctuate in markets in reaction to macroeconomic trends along with the progression of market stages for individual sectors. The art of pricing is never static, and these basic guidelines help identify key drivers in setting and maintaining the right price for products and services.

Was this article helpful? Have you used the consumer defined value matrix in your pricing process for products and services? If so, please share your thoughts and comments with the community at MarketFix.

About marketini

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2 Responses to The Customer Defined Value Matrix Explained

  1. xrosstheline says:

    Oops missed a star…sorry. Thanks for dropping by Mo had a look at your site, some great stuff on here. I’ll be visiting regularly. Which book is that? I’d love to have a squiz at it. Love the birthday card too.

    • marketini says:

      Hi xcrosstheline, I’m glad that you stopped by. The book that I referenced in my comment is

        Designing Identity; Graphic Design As A Business Strategy

      by Marc English. It is an easy read and it features a very insightful review of 9 highly successful IMC campaigns from various industries. It is a little off the beaten path as far as marketing books go, but it is one of the few books I have found that successfully marries graphic design and marketing principles.

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