The most important concept in Value Based Pricing is customer perceived value. You can only get paid for what customers believe.
I often do a little exercise in class where I put up a can of Del Monte green beans for $1.69 and a can of green beans with a store brand label like Safeway. The students have to choose one and they commit. When asked why they chose what they did, the Del Monte buyers they often give answers like brand and quality. Some store brand buyers say it’s the same bean probably canned in the same factory with a different label. What’s true?
I don’t know, but that’s the point. People make their decision based on what they believe to be true. In other words, their PERCEPTION of value. People buy based on perceived value.
Except when they don’t!
One of the fascinating aspects of subscriptions is people may initially subscribe based on perceived value, but then they begin to use the product. They learn if it’s truly valuable or not. In other words, they experience real value.
When the real value doesn’t meet expectations, buyers may unsubscribe. Maybe they don’t perfectly know the value, but they know better than before. Their uncertainty about value decreases.
The key lesson, in a subscription, you have to manage perceived value to WIN customers, but you must deliver real value to KEEP and GROW them.
Ps. I’m writing this in front of Mount Rushmore. What a majestic site. My real experience exceeded my expectations.
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