Thoughts about prices and values

Thoughts about prices and values

New products are presented to the public on the shelves of perfumeries on a regular basis – cosmetics but, in particular, perfumes are reaching the stores on a weekly basis. The question of Why this is happening is as relevant as the question How consumer prices develop. How does a commodity receive its price?

The initiation to start thinking about this aspect was an article in the German weekly newspaper Die Zeit that was published recently. There, the almost traditional aspect of artificial scarcity is mentioned: „Damit eine Sache begehrt wird, muss man sie wünschenswert erscheinen lassen und schwer erreichbar machen.“ (In order to make an item treasured, it has to become desirable and difficult to obtain). What is scarce and only selectively attainable has, at least, to be different from commodities that are available everywhere. As an analytical concept, I find the idea of a coherent arbitrarity („kohärente Arbitrarität“) very interesting. It sees commodities and experiences of the final consumer as rather coincidental and dependent upon the moment, thus situated. In the succession, the evaluations of a brand and its commodities are made coherently and in harmony with the initial contextualization. Amongst other determinants, the price falls also under this.

The idea of a price determines two concepts: the price and the value of a commodity. The price itself remains “cold”: it is a given number that allows comparisons. Producers create a price usually through calculations of real costs and intended margins. In contrast, the concept of value has more content: values are developed individually and are re-created on a regular basis. Values are not only generated at a Point of Sales but also the usage and public presentation creates valuation through recognition. A price can be a co-determinant for the valuation of a commodity. At the Point of Sales, value is created through stories, narrations and comparisons and – in the case of perfumes – usually emotionally-driven. The creation of value is mainly up to the consumer. A consumer has to get an emotional connection to the scent in order to become a buyer. Thus, a commodity is valued through its availability, its external and internal covetousness and its price.

What’s new? It is more and more difficult to survey the supply at perfumeries with new commodities. Thus, the price has the function of a signal in order to recognize a brand. As a fixed number it is an additional mediator of information. However, for the cohesive recognition also the way of representation is significant: a brand develops character, uniqueness and legitimacy to determine prices through its continuous and coherent universal exposure. Therewith, price, representation, recognition, and valuation are affecting each other.

What is left to do? Since a price is classifying a commodity, it is useful to know other brands that are acting in this category and with which characteristics these potential competitors work. In addition, the targeted Points of Sales as well as the assortment there allows an evaluation of prices. The final consumer is conscious about the marketing efforts and rather critical about the over-exposure to it so that credibility, content and reach are important discriminators for the overall decision-making process. The price only co-determines the valuation of a brand. Therewith, the word “prestige” receives new input and content beyond known and traditional boundaries.

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