Improving price satisfaction without lowering prices!

The two major influences on a customer’s perception of a firm’s value in the marketplace are their satisfaction with the relative quality of the products and services plus their satisfaction with the competitiveness of the price. Customers expect and look for value, and price plays a large role in the value equation, yet few surveys seriously consider the issue of price due to some common management perceptions such:

  • Our Business Units will be pressured to lower prices to attain improvement in customer value scores; therefore, we should only focus on product and service quality.
  • We can never attain world-class customer value scores because we can’t offer lower prices than our competitors.
  • We should expect lower satisfaction with prices because we charge higher prices.
  • We cannot hold our people accountable for price satisfaction because only a few people actually set and control prices.

Fortunately it’s not just the actual price that impacts customers’ perception of price (and therefore value).

Customer Satisfaction with Prices is Influenced by More than Just “The Price”

 Taking examples from a broad spectrum of markets, businesses need to consider two primary price satisfaction influence categories: cost and non-cost.

Costs can be broken down into the initial costs and the life cycle costs including: monthly finance charges, maintenance charges, operating costs, and end of life salvage value.

Non-cost price satisfaction influencers include overall perceived quality, billing, and satisfaction with sales. Our own work in this area has found there are many aspects that influence customers’ perception of price that are not necessarily directly related to the actual price that is being charged. These include:

  • Customer perception of their costs verses reality
  • Customer perception of one supplier’s price relative to another
  • View on how well the supplier’s management team control its costs
  • The level of customer service they receive
  • Understanding customers’ concerns around the product / service and how the company reacts to these
  • The accuracy and ‘understandability’ of the bill
  • The overall product or service brand
  • Communications from the company at an overall corporate level
  • Communications they receive from individual employees

Design of customer price satisfaction surveys

To capture data on the customers’ rating of price and to be able to analyse the data to determine the key attributes of price satisfaction, there should be a separate module in the survey dedicated to questions on price. To determine the appropriate price questions to ask, we would conduct focus groups with customers and with internal key stakeholders such as account executives, as well as viewing other data sources.

The people who are sampled and asked to respond to the price questions need to be decision makers or key influencers in the purchasing decision. Only they have the knowledge and interest in the costs associated with the products and services.

Calculation of the Price Satisfaction Score

Price satisfaction should be one of three key customer satisfaction measures that the firm tracks, manages, and targets for continuous improvement. (The two other measures are customer satisfaction with products and services and customer satisfaction with value.) The best way to calculate the overall price satisfaction score is to use the mean score from an overall question in the price module of the survey. When competitive data is available, a comparative ratio or difference should also be calculated and tracked.

Executive Ownership and Leadership

There is an art and a science to Price Satisfaction Management. Just as it is typical to assign an executive owner for product and service customer satisfaction objectives, so should a business assign responsibility for its price satisfaction objectives. Also, a general principle should be established to guide the organisation in its strategic management of price satisfaction. For example, “we will provide world class services at fair and satisfying prices”.


In summary, studies have proven that although actual price, price perception, and satisfaction with price are related, they are clearly different concepts. Customer satisfaction with price and customer perception of price must be thoroughly understood and vigorously managed.

Emphasis on improving relative price satisfaction does not necessarily mean businesses force themselves into price wars or lowering profitability. Price satisfaction should be an integral part of a complete customer satisfaction and quality improvement program.

Take the Next Step

If you would like to discuss what may be influencing your customers’ perception of price satisfaction, please get in touch.

Further Reading

Found this article interesting? You might also like:

Introduction to customer value management

Differentiating on value rather than price alone


Ray Kordupleski

Ray Kordupleski is the President of Customer Value Management Inc. and is one of Customer Champions’ US associates.

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