Value is the worth that the customers receives or the amount of money that the customers are willing to pay while price is the amount of money that the customers need or asked to pay. Theoretically a price must be a perfect reflection of value but the consumers have different perspective with regards to the value of a product. There are many consumers that uses price as an indicator of product quality (Kotler 2001) but even there are other factors that that affects the consumers perception to the value of a product still price is always the one that accurately reflects value.
The value is greater than the price when the consumers buy the product but not all the time price reflects the value of a product. There are firms that want price to say value as closely as possible by taking consumers surplus in the form of profits. According to Ben Newey a price only doesn't perfectly reflect value is when a person may buy a product or an item because they value it in that particular price but the other person would buy it because they value the item more than the price. There is a theory that tells price isn't always accurately reflecting value which is the theory that customers will pay higher prices for the right product without even investigating if the price accurately reflects the value. One good example of it is the Nike because the brand of the item is what communicates its value. But the company or business use one of the pricing strategy which they called prestige pricing to leverage their products. And according to Tucker Dawson prestige pricing had the ability to give companies a psychological marketing advantage by convincing customers that there is an added value for the cost. The idea of it becomes an advantage of the buyer’s assumption that one brand’s product is of a higher quality than the competitors because it costs more. The prestige pricing is used by organization or businesses to increase the customers’ sense of value and profits. It tells that the product doesn’t have to be the proprietor of a legendary brand to use this strategy effectively because there are great ways to use high prices as a guide towards more realistic deals and as the method for communicating value. By improving customers experience with the right environment and consistent great service the company create an image that proves the product has a great value in a high price.
The companies constantly manage price to do their goals which is usually to gain profit because there is no business that sell products or offer services without the intention of gaining profit. There are any psychological, decision bias, neurological and behavioral effects that influence how customers perceive prices so company should always remember to choose the right price that will reinforce the quality of the services to the right audience and focus on creating the value of the products they offer. The effectively to communicate the value of the product helps to build a brand and keep customers coming back to buy. I therefore conclude even there are factors that affect the consumer's perspective towards the value, price is always the one that accurately reflects the value.
Source:
T. Dawson., (2020) Prestige Pricing Guide: Examples, Strategy and Definition
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