Price Index – PI

• To sample your existing and potential customers’ views on the VFM you offer, first define what is meant by ‘Value for Money’

                                VFM = The degree to which a customer’s requirements are met

                                                       The price paid for the product or service

• The following grid can then be used to determine how your customers assess the VFM you offer

• Clearly, your aim should be for responses to lie in any of the green shaded boxes, whereupon you might expect ‘repeat custom’

• Otherwise customers might think your offerings were no better than ‘total crap’ as Gerald Ratner once unwisely described the jewellery he sold

• However, it’s interesting to note how some price levels influence customers’ opinions about the quality on offer to them viz:

  • A customer is given a glass of wine to taste and told it costs £10 per bottle

  • He’s then given another and told the second glass costs £90 per bottle

  • Tests show most people say the second glass tastes at least twice as good as the first – but both glasses are exactly the same wine

  • People can be that easily misled by price