In brief
- The price-value matrix shows whether the price is aligned with the value the customer perceives compared with the alternatives.
- It is built in four steps: needs-based segmentation, value attributes, competitive analysis and the map.
- Price is left out of the value attributes because it is what the customer gives in exchange.
- Prisier's Value Map tool performs the calculations and the chart, free of charge.
Every company asks at some point whether its price is the right one: whether it leaves money on the table or loses business on price.
The price-value matrix shows the relationship between the price and the value of each alternative in the market, from the customer's perspective. With it, pricing decisions are made with more information.
Prisier has applied it with more than 350 clients in Latin America, from startups to multinationals.
The guide works best with the Value Map tool, which automates the calculations and the chart. It is free.
Open the Value Map1. Segment by needs
Many companies segment by demographic or descriptive characteristics that rarely influence the purchase decision. For example:
- "Large vs. small companies"
- "Millennials vs. Gen X"
- "Urban vs. rural"
- "By industry"
Segmentation for pricing is based on needs. A segment brings together customers who need the same thing, value the same thing and are willing to pay in the same way.
How to segment based on needs
- List all the purchase reasons heard from current and potential customers.
- Group those that solve similar problems.
- Validate each group with three questions:
- Do they need a significantly different product or service?
- Do they have a different willingness to pay?
- Do they evaluate and compare options differently?
- Name each segment according to its main need.
Recommendations
- Focus. Between 3 and 5 segments are enough.
- Specificity. "They want to save time" is too general.
- Data. Segmentation is validated with sales data and customer feedback.
- Industry view. The useful question is why customers in the category buy.
Signs of poor segmentation
- Segments that overlap significantly.
- Differences with no impact on purchase behavior.
- Characteristics with no influence on willingness to pay.
- Segments too small to be viable.
2. Define the value attributes
This is where many companies fail, because they confuse features with value attributes. A feature becomes a value attribute only when it influences the purchase decision and willingness to pay.
| Left out | Value attributes |
|---|---|
| Technical specifications on their own | Benefits that solve specific problems |
| Features no one asked for | Features that differentiate from the competition |
| "Nice to have" with no weight in the decision | Elements customers use to justify their purchase |
| Price | Aspects for which customers are willing to pay more |
Why price is left out
It is common to include "competitive price" or "best price" as a value attribute. This is a mistake for three reasons:
- Price is the counterpart of value.
- Including it as an attribute creates circular logic in the analysis.
- A low price can even destroy perceived value.
Examples by industry
| Industry | Common value attributes |
|---|---|
| Consumer goods | Ingredient quality, flavor or variety, size and presentation, availability at the point of sale, brand |
| Industrial B2B | Technical performance, delivery time, technical support, warranty and after-sales service, credit terms |
| Professional services | Industry specialization, response time, depth of analysis, support during implementation |
| Software and SaaS | Integrations, support level, ease of use, security and compliance, onboarding |
| Higher education | Employability, institutional reputation, schedule flexibility, alumni network, delivery mode |
How to identify value attributes
- List all the product's features, including those in development and those the competition has.
- Ask three questions about each one:
- Do customers understand it and use it to compare options?
- Are they willing to pay for it?
- Does its absence cause lost sales?
- Assign a weight to each attribute according to its impact on each segment.
Recommendations
- Describe the attributes in the customer's language.
- Work with the main attributes, between 5 and 10.
- Ask lost customers what was missing.
- Identify why customers choose the company's own offer over the competition.
When the company needs to measure these weights with statistical rigor, Prisier uses willingness to pay studies and conjoint analysis within its market and pricing research service.
3. Rate the competition
Many competitive analyses fail because they are based on perceptions. The most common mistake is believing that no one else does the same thing. With correct segmentation and well-identified value attributes, the company can make objective comparisons from the customer's perspective.
The competitive analysis rates how well each player, including the company itself, delivers the identified value attributes. It should include:
- Direct competitors.
- Substitute alternatives.
- The option of doing nothing.
- In-house solutions.
How to conduct the competitive analysis
- Rate from 1 to 5 the company's own performance and that of each competitor on each value attribute (1 is the worst in the market, 5 the best).
- Weight the ratings by the attribute's weight to obtain total perceived value.
- List the price of each alternative in a comparable unit (per user, per gram, per hour).
- Plot the price-value map, with perceived value on the X axis and price on the Y axis.
| Rating | Meaning |
|---|---|
| 5 | Clear leader, sets the standard |
| 4 | Above average, recognized differentiator |
| 3 | Meets market expectations |
| 2 | Below average, area for improvement |
| 1 | Deficient, significant weak point |
Recommendations
- Support each rating with evidence.
- Include the voice of the customer when possible.
- Document specific examples.
- Review the ratings with different areas.
Common mistakes in the analysis
- Comparing only visible features.
- Assuming the competitor does everything well.
- Relying on what the competitor says or on customer rumors.
- Overlooking less obvious alternatives, including doing nothing.
- Overestimating the company's own capabilities.
To keep competitor prices up to date, automated monitoring with scraping (Sonar de Precios) replaces manual review.
4. Build the map and decide
With perceived value on the X axis and price on the Y axis, each alternative is placed on the map. The line that connects the offers with a consistent price-value relationship is the equilibrium line. The position of the offer relative to that line guides the decision.
| Position | Reading | Typical decision |
|---|---|---|
| Above the line | The price is high for the perceived value | Strengthen or better communicate the value, or review the price. There is a risk of losing share. |
| On the line | Price consistent with value | Defend the position and move the price only if the value changes. |
| Below the line | The price is low for the value delivered | Raise the price or gain share deliberately. |
The next step is to translate the map into a pricing structure by segment, through pricing strategy and architecture. The principle behind this tool is in how to apply value-based pricing.
Final steps
- Open the Value Map tool.
- Complete the analysis for a main product or service.
- Schedule a quarterly review of the matrix.
Prisier builds the matrix with customer and competitor evidence, together with the company's team.
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