2012-01-25

The Value of Price

It is a well-known fact that price itself is a trigger of value. Exposing oneself with expensive clothes, watches, cars, etc., offers a valuable addition to anyone’s social identity, consequently increases the buyer’s readiness to pay a higher price. The snag is, however, that the value of price is not linear to its character. Starting from the centre, the mainstream price level does not make any contribution to the social identity (status) of most individuals, but a moderate rise to the premium price level means an evident addition. Moving further to the luxury level apparently has the desired effect in some circles, but means, in general, an obvious risk of being regarded as ostentatious, which, again, reduces the level of social identity value. A slight reduction of the price to the smart buy level may on the other hand indicate the intelligent, calculated choice of something less expensive to a sensible quality. Further reduction to the bottom level, basic, would however be negative to the social identity, merely exposing a lack of money as well as taste.
The two-hump Camel Hypothesis is a widely used model since it was first published in 1990. Read more of the General Theory of Marketing.

6 realistic conditions for marketing theory

Marketing has become one of the most important disciplines in business, but its underpinnings are still dubious. All development has mostly been concentrated to its surface, and I think that some attention to its foundations would sort out some discrepancies in these superimposed concepts. These embarrassingly simple points may add some reality to everyday marketing activities. 1) The transaction is the objective of all business. 2) The transaction is always accomplished when the buyer considers the value of the offer higher than the price asked for it (if not, he doesn’t buy). 3) As communication is central to marketing, brands are required to make it work. 4) Consequently, marketing can only be performed with branded products. 5) Value and brands exist in the human mind only – and in business they count only in the mind of the (potential) buyer. 6) This is why a theory of marketing demands a profound and up-to-date knowledge of human perception and behavioural science. If you want to study my reasoning in detail, download my General Theory of Marketing.