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Benefit Pricing

 

DisciplinesMarketing > Pricing > Benefit Pricing

Description | Example | Discussion | See also

 

Description

Price items based on the good things that people get from owning and using them.

Benefits include:

  • Functional benefit: What people can usefully do with the product, such as the ability of a phone to remember contact details.
  • Ergonomic benefit: The way the product works well with the body, such as the way a phone fits the hand and ear.
  • Aesthetic benefit: How the product gives sensory pleasure, such as the pleasing hues of a phone.
  • Social benefit: The way others will praise or admire the customer, such as being impressed with them owning the latest phone.
  • Economic benefit: How the product saves the customer money, for example by its long and reliable lifetime.
  • Ecological benefit: How the product has minimal effect on the environment, such as the use of recycled materials.

The more benefits you can identify that customers will accept as valid, the greater the price you can charge. And vice versa.

Example

A bedding retailer bases their prices on comfort and style.

The prices of a steel parts manufacturer are based on durability (which comes from steel and weld quality) and responsiveness to queries.

Discussion

Benefits are not the same as features, which are typically physical aspects of the product. Sales people say 'sell on benefits, not features', which is a wise move. Features deliver benefits, such as a seat adjuster (feature) which gives the benefits of comfort and freedom from back pain.

Although customers get benefits, they may not realize these unless you alert them to the detail of why they are benefits. This is often a key role of marketing. Sales people also need to be trained to understand and highlight these, especially when justifying prices. If a customer does not recognize a benefit then they are unlikely to appreciate it.

People can also get disbenefits from a product, such as the harm of repeated button pressing, although these are seldom mentioned by a seller and are unlikely to be included in pricing. Having said this, if the disbenefit is known, then prices may be reduced or capped accordingly.

See also

Features and Benefits

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