Serving customers is what business is all about. No matter what type of business you are in, there is sure to be some customer that you need to satisfy. That customer could be an individual consumer walking into your store or visiting your website, or it could be a large corporation that wants to buy some of what you offer.
Whatever the case, the perceived value of what you offer to those customers is going to be critical in your success or failure. If customers perceive the value of your goods or services to be high, they’ll be likely to pay more and buy more frequently. Of course, the opposite can be true – an offering that has a low perceived value is going to struggle to turn a profit.
This article is going to dive into the details behind customer perceived value. We’ll talk about what it is, why it matters, and how you can work to drive it up for your products or services. Let’s get started!
What is Customer Perceived Value?
As the name suggests, customer perceived value is the perceived worth of what you offer in the minds of your potential buyers. This is different from any “hard” value you might place on your goods or services, such as the cost to produce one unit of an item. The perceived value is harder to determine because it is somewhat ambiguous by nature, but it’s an important factor that you need to keep in mind when marketing and selling your goods or services.
You can more easily understand the importance of perceived value when you think about things from the perspective of a customer. In any given transaction, there will be a collection of both costs and benefits that the customer must weigh before agreeing to a deal. And, many of these costs and benefits are more subjective than you might imagine. Sure, the actual price of an item is not subjective, but things like expectations and emotions can vary wildly from one person to another.
Let’s use a simple example to highlight this concept. Imagine two hungry people walking through a shopping district in the evening. These people decide that a cheeseburger and fries sounds good for dinner, so they focus their attention on two nearby restaurants that offer such fare. One is a fast food joint, and the burger and fries will cost just $5. The other option, however, is a more upscale option, with a burger and fries coming in at $15.
So, which is the better value? Purely from a cost perspective, it would make sense to spend just $5 to get the cheap burger and fries. But that’s not the only factor the buyer is going to weigh. There is also the perceived value that comes from the experience of enjoying a delicious burger and quality fries with a friend. Between the higher quality of the food and the elevated dining experience of a nicer restaurant, the consumers may decide that spending $15 is actually the better value.
It’s up to each of these businesses to deliver the maximum value based on their target niche in the market. The cheaper restaurant will likely focus on the speed of their service, convenience, and food that is good enough for the price you pay. For the more expensive option to deliver value, it has to be about more than just the basics – they will promote their comfortable dining room, friendly staff, high-end ingredients, etc.
The Importance of Customer Perceived Value
Okay, so customer perceived value is a pretty easy concept to understand once you think about what your customers are experiencing when they buy from you (or someone else). Next, let’s take a look at exactly why this is such an important concept for business owners and managers. In other words, what’s in it for you?
- Establish brand loyalty. One of the most powerful functions of delivering high perceived value is that you can get people to come back over and over again. When someone feels like they are getting more than their money’s worth on a purchase, it only stands to reason that they are going to return. And, the inverse is certainly true – if a buyer isn’t happy with their purchase, that will likely be the last one from your brand. Keep your perceived value high and you can enjoy a stream of returning customers over the coming months and years.
- Raise the price. When you are seen as offering excess value to your customers, you will have the opportunity to raise prices. We’ll talk about this again in the next section, but the benefit of charging more for your goods or services is obvious – you make more margin on each sale, and you need to make fewer sales in order to turn a profit overall. It might take a bit of experimenting to find the sweet spot where you can still make a lot of sales while charging a price that might be higher than your competition. This will deliver diminishing returns at some point, of course, as the price could get too high for your perceived value and customers would start to drop off as a result.
- Benefit from referrals. Yet another way that working on perceived value can pay off is when it encourages your customers to go out of their way to tell others about you. If someone feels like they got a great deal for their money, they’ll be extremely likely to point new customers in your direction. Each of those referrals is a new lead that you didn’t have to pay for through some form of advertising, so your effective margin on those customers is even higher than it would be otherwise.
Many Options for Improvement
As you work on the task of driving your customer perceived value higher, you’ll want to consider a number of different possibilities. It’s likely going to take some trial and error before you are able to zero in on the changes that make the biggest difference. Consider the ideas below and pick out the ones that seem to apply most directly to your situation.
- Lean on testimonials. You can help your potential customers to see the value in your brand’s products and services by directly presenting them with the comments of other customers. Testimonials are so popular online simply because they work. Having social proof that what you are selling has been valuable for other buyers will go a long way toward elevating the value of those goods in the minds of new customers.
- Great support is required. On this point, you should think of offering excellent support as a prerequisite for delivering high value, rather than something that is optional. It’s hard to imagine a company that doesn’t offer good support ranking well in terms of value with their customer base. Support can mean many things, but it usually comes down to answering inquiries promptly, fairly dealing with returns and product issues, and generally standing behind what you sell. Even if most of your customers never have to interact with support because things go smoothly with their purchase, it’s how you treat that small percentage that does need help that is going to make a big difference in your brand’s perceived value.
- Add a cause. You should be willing to look in all different directions to boost the value that you offer to customers, and one interesting direction to explore is the idea of supporting a cause with your brand. This has become more and more popular, and it really is a winning idea all the way around. Simply select a cause that is in alignment with your brand’s image and commit to supporting that cause in some meaningful way with every purchase. For example, you might donate 1% of gross revenues to the cause, or you might commit a certain number of volunteer hours from your organization. Whatever the case, promote this commitment to a cause and then back it up by taking the actions you said you were going to take. Through this method, you can give people yet another reason to buy from you and feel good about the value they are receiving.
- Bring prices up. So this is one trick that doesn’t seem like it would work, but quite often it does. You are simply going to raise your prices to position your brand near the top of your market segment. By asking a higher price, and then managing to impress nearly all of your customers, you will elevate your status and raise your perceived value. There is risk here, of course, as charging a higher price is going to raise the expectations of your customers – so you need to be sure that your product and service can clear the higher bar and still earn rave reviews.
- Display an even higher price. We just talked about charging a higher price, and that is a good strategy, but you can also do yourself a lot of good by showing customers an even higher price before cutting it down for a special deal. You have certainly seen this over and over again when shopping for things in your personal life. You might consider buying a shirt that was originally marked at $35, but is now on sale for $25. Instantly, your potential customers will raise the perceived value of the purchase in their minds, since they feel like they are getting the item for less than it is worth.
- Develop demand. Lastly, think about using strategies to boost demand for your items. Making things feel like they are hard to get will automatically lead to an elevated level of perceived value when it seems like a lot of people are clamoring to get the same thing. Tactics like asking people to sign up early before the item is available are a great way to introduce a feeling of scarcity into the process. Or, you could simply limit your production runs in the case of physical products, while raising the price at the same time. As long as people genuinely want what you are selling, creating scarcity can be a powerful method for boosting your value profile.
Maintaining the highest possible perceived value for your goods and services is one of the most important tasks you can manage. With a lofty perceived value, it will be relatively easy to make sales and drive revenues higher – but it takes constant work to keep your offerings valued highly in the minds of your potential buyers. We hope this article has been helpful on this front and we wish you the best of luck with your endeavors!
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