Pricing Strategy: Value vs. Features

I read an interesting article concerning product pricing on The article makes a very interesting and valid point:

The Internet provides to both business and individual consumers the capability to track prices around the globe any day of the year. Consequently, when ready to buy, the consumer already knows the price, and needs to be convinced based on the perceived value.

Many companies do not base their pricing strategies on perceived value. Rather, they base them on the amount of features the product offers. A great example of feature based pricing are PCs.

Most PC companies (HP, Dell, Sony, etc.) bundle an excessive amount of feckless software with their computers. By doing so, these companies believe that the extra software validates the higher pricing level. But Apple, with their line of Mac computers, does the opposite.

Apple, for quite some time, has built a reputation of value with its loyal customer base. When you buy a Mac, you will not get the extra software that comes with traditional PCs. However, the software that does come on a Mac is valued by most end consumers. Right out of the box you get the ability to edit pictures and video, record your own songs and podcasts, and the capability to burn DVDs. It is true that you can get software that accomplishes the same tasks on a PC, but you have to pay extra for it. They come standard on a Mac. Have you seen the new Apple commercials? They do a great job of explaining the great features of Mac compared to a PC. But this post is not about Macs and PCs; it’s about value versus features.

The problem with a feature based pricing structure is that companies tend to develop overbuilt products that do not necessarily solve a customer’s problem. Another problem is that the companies lose money through development costs and deals by adding these extra features. Conversely, having a value based pricing structure allows companies to focus on the key features that differentiate its product.

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2 Responses to “Pricing Strategy: Value vs. Features”

  1. 1 Blake May 19, 2006 at 8:43 pm

    Michael – thanks for the goodbye note on my last post. I appreciate the fact that you read my blog and shared many ideas with me along the way. The blogosphere needs more people like you. Good luck to you.


  1. 1 GeoWeb Business/Licensing Models | Off the Map - Official Blog of FortiusOne Trackback on April 17, 2009 at 10:09 am
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Who am I ?

My name is Michael Morton. I believe in bringing energy and professionalism into the office, that knowledge is power, that leadership trumps management, that customers are more influential than advertisements, that content is king, and that two heads are better than one. I currently lead the marketing efforts of the Strategic Alliances department of my company. Let’s talk marketing!

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