Perceived Value: The Secret to More Sales and Higher Profit
Stop trying to convince prospects you’re the “best” and focus on THIS instead.
Did you know Tiffany & Company crafts a sterling silver clothespin that you can buy for just under $700?
Go ahead, click the link and place your order.
Of course, I’m joking—few of us would pay that much for something used to hang socks up to dry. And though this is an extreme example, the clothespin’s price tag is no joke. But how does Tiffany & Company sell their merchandise at such high prices?
Tiffany & Company has built a reputation—a brand—that allows them to command a premium.
There are thousands of luxury brands worldwide and even more in the premium category. Their success proves a business can sell at higher prices and thrive. So, the question becomes whether yours can do the same.
The answer is yes.
In this post, you’ll learn:
- Why value is subjective
- The secret ingredients of perceived value
- Nine value-building strategies you can implement now to grow profits
Value Is Subjective
It’s a given that the purchaser will receive value from a product or service when they buy it.
Business owners often develop “reasons to buy” based on the value they believe they offer. Then, they create benefit claims around that value to market to their target audience.
But this approach to sales falls flat because the customer’s definition of value is the one that matters. And when a business expects the customer to buy based on any other definition, they will face rejection—a lot. Selling is complex because consumers value the same products for different reasons.
For example, one person may buy a car brand because of its safety rating. But someone else might prefer it because of its advanced technology.
Thus, “value” is subjective.
Some companies know how their customers define value. So, they align benefit claims to position their products. So, if people want easy access to the product, the brand uses convenience as a reason to buy.
This selling approach is much more effective.
Yet, relying on consumer opinion alone can lead a business into the commoditization trap.
Businesses that cannot differentiate fall into the commoditization trap. Many companies without unique positioning try to outsell competitors by lowering prices. Unfortunately, discounting backfires when a competitor sells for less.
Other factors play a role in commoditization. Consumers don’t always have the expertise to evaluate products. Past experiences or inaccurate information also influence the buying process.
So, how can a brand offset the challenges of subjective value and commoditization?
Let’s find out.
The Concept of Perceived Value
In the section above, we learned many businesses struggle to differentiate. As a result, companies without unique positioning often lower prices and risk commoditization. The subjectivity of value also makes selling difficult.
But the game changes if a brand can influence the customer’s perspective of value.
Perceived value is a combination of the tangible and intangible worth of a brand in a customer’s mind.
Corporate brands like Apple and BMW have spent years building reputations that support premium prices. But most organizations lack big-brand pricing power. However, small brands can price at premiums with effective positioning and targeting.
The more value something appears to have, the more people will pay for it.
For example, water is a commodity. Yet, people buy bottled water every day. Why?
Consumers believe bottled water is safer to consume. People feel this way because brands educated them on the benefits of drinking it. As a result, health-conscious consumers appreciate the value and will pay more for it.
If it’s possible to build perceived value for water, it’s possible to do it for your product or service. Now, let’s discover how.
The Ingredients of Perceived Value
You only get one chance to make a first impression. First-time encounters create a positive experience or a negative one.
How your audience perceives your brand will affect the value of your offer. The more positive experiences consumers have with your brand, the easier it is to build value. So, the power of a brand identity is crucial to your success.
To create a brand and build perceived value requires a combination of the right ingredients. What are they?
One thing is sure: if you don’t believe in yourself, no one else will either. Belief in your value is the key to creating more of it.
“Whether you think you can or you think you can’t, you’re right.”
Eventually, someone will challenge your value proposition. And if you aren’t confident in your offer, you won’t convince customers they need it.
The best way to gain the assurance you need is to analyze competitors. By studying their offers, benefit claims, and guarantees, you will have a basis on which to build yours. But mindset alone isn’t enough. You must also have a polished…
Humans process an image within 13 milliseconds. So, the brands that make the best presentation—and the fastest—win the sale. Your brand image is one of the first interactions customers will have with your company.
A polished brand image makes you more memorable, professional, and trustworthy. It also reflects traits such as organization, quality, and can increase financial worth. Once your image is polished, you must then provide…
Many business owners think “good work” and “great service” are the way to a prospect’s heart. But customers won’t experience these benefits until after they buy. These claims are also weak and vague, which won’t prompt people to act.
Instead, you must prove beyond a reasonable doubt that your offer best fits the customer’s need.
“Best” is another term that is difficult to quantify. Fortunately, you don’t need to prove your solution is the best in the world. Instead, you must position it as a highly qualified solution to the customer’s problem.
In a court of law, the winning side is the one that made the strongest argument. You can use the same strategy attorneys use in court to create more perceived value.
The best way to offer proof is to put yourself in the customer’s shoes.
As you do, answer these questions:
- What factors do your customers consider when deciding to buy?
- What expectations do they have of the product or service?
- What single feature or benefit makes the greatest impact on their choice?
Many business owners give little thought to what it’s like to be one of their customers. They’re so busy that they forget about the customer’s journey from beginning (introduction) to the end (purchase).
A word of caution: Never misrepresent yourself or your products and services to make sales. It only takes one mistake to destroy your credibility.
9 Strategies for Creating Perceived Value
1. Benefit vs. Cost
People will only buy something when they believe its benefits outweigh the price.
A deep awareness of your audience’s desires and pain will help you increase the value of your offer. Empathy enables you to foster stronger connections with your customers. People believe those who understand their problems are more qualified to provide solutions.
2. Leverage Emotion
Most products and services deliver functional benefits. But premium brands offer strong emotional benefits, too. These benefits are more powerful because emotions motivate humans to act.
To create emotional benefits, think about how your customers’ problems make them feel.
For example, a clothing brand might focus on the positive social experience someone will have by wearing their products. So, an audience who is uncomfortable in social settings would be an ideal target for this brand.
3. Raise Prices
There is a link between the value of a product or service and its price. Human psychology assumes that if something costs more, it must be better.
An excellent example of this came from a study of wine drinkers. Researchers gave an audience cheaper wine but told them it was an expensive brand. After tasting it, the audience responded with positive reviews.
Scientists then gave the test group an expensive brand but claimed it was cheap wine. As expected, the audience said they preferred the former, “more expensive” brand.
4. Time vs. Money
Time is money. So, if people can save time by using your product or service, they will see a financial benefit for buying it. Linking the time saved to a dollar amount is an effective way to generate more perceived value.
For example, assume you can save a customer an hour each day by using your product. A value of $100 an hour equals a saving of over $36,000 a year. Time-value comparisons shift your customer’s perspective of cost.
5. Form Strategic Partnerships
Alliances with brands that have a reputation for quality can elevate your business’s status.
This strategy also raises perceived value when partners develop offers with a wide range of benefits. For example, a veterinarian and kennel may sell memberships that includes medical plans, boarding packages, and other services for pets. The combination of services gives the audience an offer that vets and kennels alone cannot provide.
6. Reframe Cost Comparisons
Is the cup half-full or half-empty? The answer is: it depends on how you look at it.
This old lesson in perspective illustrates how reframing works. The goal is to leverage the brand’s strengths and defend its weaknesses.
For example, a person may challenge your prices and claim your brand is “expensive”. To counter, you could reframe your brand as a boutique company that emphasizes personal service.
Reframing reduces the expense and raises the value of benefits received in the customer’s mind. Another successful reframing example is “the cost of one cup of coffee a day”. Several charities have used this claim to reframe cost and reach contribution goals.
Another advantage of the reframing strategy is that it helps the business focus on a better target audience. Customers who don’t appreciate your offer yield less profit in the long run and drain your energy.
No one can deny the power of exclusivity.
When we hear products are “rare”, or “in limited supply”, we’re usually prepared to pay a hefty sum for them. A product or service that is not easily acquired becomes worth much more for no other reason than its limited availability.
A recent example came during the COVID-19 pandemic. The price of toilet paper has increased over 15% because of limited wood pulp supply and problematic shipping logistics.
But you don’t have to wait for supply or manufacturing problems to occur. It’s possible to create exclusivity simply by controlling availability or barrier-to-entry.
8. Reduce Risk
Risk reduction via money-back guarantees and warranties can eliminate any hesitancy people have about buying your product. Service providers can also reduce risk with money-back guarantees and customer satisfaction processes.
Many business owners fear that offering such guarantees will lead to a host of refunds and critical reviews. However, research shows that consumers favor products that offer money-back guarantees and extended warranties. People naturally fear something will go wrong with a product or that companies may forfeit the services promised.
A word of caution: state guarantees clearly, including the terms and other relevant commitments before making them. Otherwise, you may not be able to follow through.
As an example, offering a money-back guarantee without clarifying the terms of the refund can cause problems such as angry customers and lawsuits.
9. Demonstrate Expertise
There is a direct correlation between skill level and prices. To build perceived value, show people why you are qualified to help them.
In a previous section, you learned consumers cannot always compare options because they lack the skill or knowledge. Therefore, brands that educate the target audience empower them to make better decisions while building trust and authority.
Search engines favor websites that build expertise, authority, and trust. For online businesses, building a reputation is now a prerequisite for success. Expertise is the cornerstone of a trustworthy online brand.
Value itself is subjective. So, create a higher degree of perceived value by having the right mindset, making the best impression, and providing proof beyond a reasonable doubt that your offer is the best solution to your customer’s problem.
The degree of perceived value increases gradually. So be sure you can deliver long-term and never cut corners or sacrifice integrity. It takes a long time to build a reputation of quality and value, but only one mistake to destroy it.
If you need help, email me personally at email@example.com.
Until next time,
Managing Director, The Brand Auditors