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Perceived value versus price

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Explain the perceived value of a good or service in terms of benefits versus price. Be sure to include what considerations should be taken into account when developing service pricing strategies. Include examples to support your reasoning.

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Solution Summary

This solution covers perceived value and the price of goods and services. It discusses value added and pricing theory along with customers perception of value.

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Perceived Value versus Cost

There are several methods by which the price of a good or service can be set by the provider or marketer. Cost-based pricing concentrates on the cost bases of products and services, competition-based pricing on comparison of competitor prices and value-based pricing utilizes the value that a product or service delivers to customers (Johansson, Hallberg, Hinterhuber, Zbaracki, & Liozu, 2012).

The perceived value of an object is the object's perceived worth to the individual (Lee, Trail, Kwon, & Anderson, 2011). Another way to look at this subject is that perceived price, is the consumer's opinion of the amount of sacrifice, such as hours of labor required to earn money to pay for the good or service, and its merit in comparison to what the consumer will gain (Alhabeeb, 2002). 68% of the United States Gross Domestic Product (GDP) is attributed to service industries (Office of the United States Trade Representative, 2014), it is imperative that service and goods providers understand how to price their product to attract and retain consumers. Explain the perceived value of a good or service in terms of benefits versus price.

Parasuraman and Grewal (2000) identified four types of ...

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