Pricing should represent the value that customers are willing and able to pay. A real-world example is customers’ readiness to pay a price premium for energy-saving appliances. Zhang et al. (2020) state that energy consumption has resulted in massive crises and severe global difficulties, such as environmental concerns and global warming. Household appliances are widely used goods that require a tremendous amount of power. The widespread use of energy-saving appliances conserves energy while also encouraging the development of a low-carbon economy; nevertheless, energy-saving equipment is more expensive than regular household appliances (Zhang et al., 2020). The findings indicate that customers’ attitudes about acquiring energy-saving appliances influence their willingness to pay a price premium (Zhang et al., 2020). Hence, customer perceptions of quality, cost, emotional, and environmental factors all have a substantial and positive influence on their purchase behavior. Firms that manufacture and sell energy-saving appliances, such as Frigidaire and LG, profit and gain from selling these products to the customer.
Value-based pricing is widely regarded as an effective method of obtaining profitable pricing. Kienzler (2018) argue that pricing practice is often classified into three types such as cost-based, competition-based, and value-based pricing. Value-based pricing is customer-focused, and empirical data support its superiority over alternative pricing approaches (Kienzler, 2018). Nonetheless, based on your example, I also believe there should be a distinction between where high cost is fair, such as luxury and environmentally friendly items, and where it is unethical, such as EpiPens. I think that prices should reflect only the cost of making a product or delivering service when products are crucial for survival, such as food. Guo (2021) suggests that responsibly pricing a product is a critical choice for any company. Thus, businesses that employ ethical pricing techniques to sell their products and profit are significantly more appreciated than those that harm and deceive competitors and customers.
References
Guo, V. (2021). Ethics and pricing: 5 must know pricing ethics issues and how to avoid them. Web.
Kienzler, M. (2018). Value-based pricing and cognitive biases: An overview for business markets.Industrial Marketing Management, 68, 86–94. Web.
Zhang, Y., Xiao, C., & Zhou, G. (2020). Willingness to pay a price premium for energy-saving appliances: Role of perceived value and energy efficiency labeling.Journal of Cleaner Production, 242. Web.