The high value your products or services create may still result into poor sales unless customers recognise the value they are obtaining.

The traditional economic theory portrays customers as rational econoomic actors. It emphasizes that the consumer-decision making is driven by economic principle of utility maximisation. BUT, In principle, the consumer-decision making process is affected by numerous other factors apart from utility-maximisation equations.

As the world gets more and more connected facilitated by technology, more and more information becomes available that leads to forming varied opinions and perceptions around value.

At a lot of instances, customers use metal shortcuts while making decisions, often by looking at analogous products to evaluate relative value. A customer may view a $5 capuccino as a bargain if the other drinks on the menu are priced higher, yet the same $5 cup will look very expensive if it is surrounded by $2 alternatives.

Sometimes community held norms around fairness can limit the amount a pharmaceutical firm can charge, even if the drug is a life-saver with no viable alternative.

These anomalies and factors apart from rational calculation of value affect customer responses to prices in many different ways. The entire CONTEXT and PURCHASE SITUATION comes into play when customers evaluate the prices and value the derive out of the purchase.

Thus, a critical aspect of pricing strategy is the presentation of prices in ways that will influence perceptions to the seller's benefit. The journey from perception of prices and value and their perfect rational evaluation is filled with buyer's propensity to conserve time and mental capacity using imperfect, but convenient decision rules.

A marketer who understands these decision rules can often communicate value in a ways that lead buyers to evaluate them more favourably. These communications of value must account for whether the benefits to customers are psychological or monetary in nature. A marketer should be explicit about the quantified worth of the benefits of monetary value and implicit about the quantified worth of psychological benefits.

Price and value messages must also adopt for customers' stage in the decision making journey of the purchase. In the case of cellphone sales, whe the customers are at the information stage of the purchase journey, the value communication goal is to make the most differentiated and value creating features, such as screen size, data transfer speeds, pircture quality, salient for the customers.

As the customers move from the search stage to the fulfillment stage, the nature of messaging may shift from value to price as the marketers try to frame the prices in the most favourable ways possible. It should not come as a surprise when a cellular provider frames prices in terms of pennies a day rather that one big flat fee for complete product purchase. Even though Apple does not use pennies-per-day approach in their marketing strategy, a lot of buyers evaluate the price of an iPhone on this parameter by taking into account the overall useful life of the phone without degradation of processing speed. One customer in India buys the latest iPhone every 5 years by calculating its per day cost of ownership. This customer would be fine with paying INR 120K for the latest phone when they evaluate the cost per day at INR 66/- (for an average life of 5 years).

One research has demostrated that reframing prices in smaller units that are more easily compared with the flow of benefiits can significantly reduce customer price sensitivity.

The price framing of a coffee bag in terms of cost per cup is not an accident. It is an attempt to make customer evaluate per cup cost of coffee consumption at a cafe vs at home.

A marketers goal is to get right message, to the right person, at the right price point in the buying process.

A large part of this writeup is taken from 'The Strategy & Tactics Of Pricing' by Thomas T. Nagle & Georg Muller.

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