Price is a fundamental element of economics, commerce, and daily life. It is not a random numerical value assigned to a product. Before fixing the price of a product, several factors come into play, with the economical concepts of elasticity of demand, consumer preferences and perception towards the price of the product. It is the degree of responsiveness of the quantity demanded to a change in price of the product. In this article, we will delve into two things, firstly, the consumer's perception towards the brand and the second being the perception of the consumer towards themself.
To understand the relationship between consumers and their perception of a brand, let's look at an example to illustrate the point. Price hike on Apple products doesn't necessarily convert to the consumers’ sensitivity to these price changes. The consumer tends to be relatively insensitive towards the price since the consumer puts more weight to the brand and the value associated with it. The brand has a trust and reputation which provides them the flexibility to play with the price more often. Meanwhile, if we were to consider a non-luxury product, consumers would react differently and put more emphasis on the price value of the product rather than the brand value, and the features due to how the brand has built their market image.
Now let’s look at the consumer's perception towards themselves. This aspect is deeply rooted with the psychological aspects of the consumer. The consumer will be more particular about the costs that they may incur, their beliefs and perceptions towards the product. For instance, if a consumer earns an average monthly income of 25-50k, they tend to be more cautious about their expenditures and think twice before purchasing a product that they perceive as overpriced. Value for money often overrides the value for luxury. The only way this can be broken is if the company can place their product as a desirable product or service.
Therefore, before establishing the price of the product, there are some key factors that need to be acknowledged and taken advantage of. Conduct a thorough user research to understand your customer’s needs, wants and desires, exercise marketing techniques to find the right brand representation you wish to build for your product to shape consumers’ perception towards it, and arrive at a pricing strategy that aligns with these things.