The Complete Guide to
Customer Perceived Value
Do you know the importance of perceived value?
It’s a buzzword that marketers and business gurus often use, but what does it really mean?
Perceived value is the term used to describe the value that customers place on a particular product. This value is determined regardless of the product or services actual value.
Improving the perceived value of your products or services can transform your business.
When customers feel they are receiving a superior product that exceeds their expectations, they are more likely to become repeat consumers.
This notion is the same for employees. When they feel that they are valued and are receiving greater benefits, they are more likely to work harder and push themselves. Employee of the month programs are one of the easiest ways to increase perceived value for human resources.
In this complete guide to understanding perceived value you will learn the ins and outs to what perceived value is, why it’s important and how to leverage it in your business.
There is a lot of material in this guide. Feel free to start at the beginning, or use the links below to skip to a specific section. Happy reading!
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What is Perceived Value?
In marketing, perceived value is the evaluation customers make about the particular benefits of a good or service. This evaluation is based on a wide range of factors, but is primarily driven by how your specific good or service meets their needs and expectations.
These perceptions are also driven by how your business compares to your peers. When you elevate the perception of your brand, customers will be willing to pay more for your goods and services.
What utility do these products really serve?
Is it just a bag to hold your personal items? Is it just a tool to tell time?
Of course not!
Luxury brands have been able to harness the power of perceived value. For this reason, they are able to sell a similar product at a much higher price point.
In fact, consumers wear designer clothing and luxury brands in order to increase how others perceive them.
The entire purpose of luxury brands is to increase a consumers personal perceived value.
So, simply put, what is perceived value?
Perceived value is the price consumers are willing to pay for your goods or services.
Consumers often make snap decisions, and according to Professor Gerald Zaltman at the Harvard Business School, 95% of all purchases are driven by our subconscious mind.
This means that without even thinking about it, we all make decisions and evaluate products before purchasing. This happens dozens if not hundreds of times each day.
For business owners and marketers, understanding the perceived value of your goods and services is essential in helping you to market your products more effectively.
When done correctly, a perceived marketing campaign can significantly enhance how customers view and interact with your brand. It can help build a loyal fan base and increase operating profits.
Why is Perceived Value Important?
No matter what your business might be, every purchase made by a customer is based on the perceived value of the products or services that you are offering.
That means understanding how customers are currently perceiving your brand and knowing how to highlight that perceived value is essential in helping you take your brand to the next level.
Think about the last purchase you made.
No matter whether it was purchasing a new television or booking a holiday vacation, you will likely have spent some time researching the available options. You start by reading reviews, perusing social media and comparing prices.
All of theses activities help you create an idea of the options available to you before choosing the one that you perceive to give you the greatest value.
This is the exact same process that your customers are going through when purchasing your products or opting for your services. Typically, customers will form an opinion on your products in one of two ways:
- By the information you provide them through your marketing and promotions
- How you demonstrate that your products or services can improve the lives of your customers.
All of this combined makes perceived value an incredibly important part of any business.
Your customer’s perception of the value that your brand provides is essential to your success and will drive everything from your marketing, to your product pricing.
When you are able to clearly understand your perceived value, you can tailor your services accordingly.
This will allow you to increase your prices to match expectations and ensure that your customers are happy.
You will be able to build deeper relationships with them which will cause them to be more likely to return again and again.
The Psychology Behind Perceived Value Theory
A customer’s perceived value is based on their belief that your brand meets or exceeds their expectations.
There are a number of factors that determine how consumers create this value, and it can differ between consumers.
If your products are able to exceed the expectations of the customer, both in terms of quality and price, then they will have a positive impression of your brand.
The greater the logical, physical, and emotional benefits of your products or services in comparison to expectations, the higher that impression will be.
Charging More for Your Services
If a customer perceives the value of the product or service they are receiving from you as higher than their expectations, they are more likely to pay a premium.
It will also significantly improve their opinion of your brand, which will result in increased retention, positive reviews, and word-of-mouth recommendations.
While perceived value is a highly subjective and personal feeling, it is also malleable.
Understanding the factors that drive your customer’s decisions will begin to transform your business.
While most of us would like to think that the decisions we make are based primarily on logical and data-driven facts, the reality is that we all tend to buy based on our emotions.
This means that you need to be focused on making your customers feel good by not only solving their problem, but by exceeding their expectations.
While this can seem like a complex task, in reality, the psychology behind perceived value often just takes some re-framing of your current products and services.
For example, remember the fable of the ugly duckling.
For much of the story, the perception is that this creature is ugly and unwanted.
However, by the end, it is a beautiful swan that everyone wants to be friends with.
Despite this change in perception, the animal is fundamentally the same, and it is the rest of the creatures who have changed their viewpoint.
How to Leverage Perceived Value in Your Business
There are many different ways that you can change the viewpoint of your customers and increase the perceived value of your brand.
Your overall goal is to improve how consumers perceive your brand, and there are three key areas to focus on:
In the hustle and bustle of the modern world, time is one of the most valuable commodities that we have.
Everyone is looking for ways to help save time, and research has shown that consumers who are able to do so have greater satisfaction in life compared to those who opt for material goods.
What we learn from this? Saving Time is Important to Consumers
To leverage the perceived value of your business, focus on highlighting the time-saving benefits that your products or services offer.
By appealing to this core focus, you will be able to elevate your brand above your customer’s expectations.
With respect to internet standards, we launched the online version of Gem Awards very late. Our website at gemawards.com was officially launched in 2018.
Initially we thought it would be very difficult to compete in the highly competitive awards industry.
After all, there was one behemoth company that has dominated this space for over 20 years.
In order to compete,we knew we needed to find a value niche in the market. To find that niche, we began conducting market research.
What did we find?
We found that most awards customers were concerned with 2 things:
- Turnaround Time
If you think about it, both of these consumer preferences focus on time.
Firstly, if the engraving is wrong, or there are misspellings, it costs a customer time to fix it.
Secondly, long turnaround times increase uncertainty to customers and delays cause them to move awards banquets or events.
We decided to make these customer values and incorporate them into our value proposition.
By simplifying our product lines, and streamlining out processes, we are able to ship most orders within 48 hours of the customer placing the order.
For personalized products, this is extremely fast – and our customers love it!
Naturally, hundreds of positive reviews followed and we began to gain significant market share over our competitors.
Take a careful look at the words our customers use in some of our newest google reviews.
Do you notice the words?
Quick Delivery. Correct. Spelled Correctly. Easy to Order etc.
All we did, was give customers what they wanted and tried to exceed their expectations – thus increasing the perceived value of our products.
Price is also a crucial factor when it comes to improving your perceived value. Customers will compare your pricing to that of your competitors and typically will factor the cost into two key points:
The lowest price is not always what consumers want, and many are willing to pay more for a premium and consistently high-quality product.
KitchenAid Mixers and BlendTech Blenders have been able to sell their products at a premium to customers due to their superior quality.
When customers buy a BlendTech blender or a KitchenAid mixer, they tend to think it is the last one they will every buy.
There is an idea of perceived quality. By increasing the perceived quality of your product, you will be able to create a premium offer.
Of course, a more economical product also has a vital place in the market. Customer expectations are usually lower for value-priced products or services, which is often easier to ensure the perceived value is higher.
3) Company Reputation
The reputation of your company is also crucial in helping you to leverage perceived value. When consumers are able to see positive reviews and testimonials from existing customers, it greatly improves the perception of your brand and has a positive effect on their overall satisfaction.
Customer service is also a key part of leveraging your perceived value. Every consumer who engages with your brand should leave feeling they had a positive experience, no matter whether they purchase a product or not. Any form of negative customer experience can result in serious damage to your reputation, which creates a much lower perceived value.
Of course, company reputation is not only based on previous customer experiences. Working with other trusted brands and businesses that already have an established and proven reputation can significantly enhance your perceived value.
Investing in a Perceived Value Marketing Strategy
Being able to leverage perceived value in your business can provide you with a wide range of benefits and help you to elevate your brand. Some of the biggest advantages of investing in a perceived value marketing strategy include:
1) Charge more for your products
Adopting a perceived value marketing strategy will help you to increase your brand awareness and the value that customers place on your products and services. In turn, this will allow you to increase your prices accordingly.
When a customer places a higher value on your brand, they will no longer be wondering whether they can afford your products. Instead, they will be asking whether they can afford to live without them.
Ensuring that your marketing is effectively promoting your brand, highlighting those key touchpoints such as time, price, and reputation, you will be able to significantly enhance the perceived value customers have of your business.
2) Increases conversions
An effective perceived value marketing approach does not just mean you can increase your prices, though. When you are effectively targeting buyer’s emotions and leveraging their perceptions in your brand, you will also be able to significantly increase the conversions that your business enjoys.
When consumers place a higher value on your products and services, they are more likely to purchase items without questioning. This is a particularly useful opportunity for online stores, where abandoned carts are a significant issue, with the average rate across all industries being a shocking 69.57%, which is equivalent to $18 billion.
Being able to tweak your marketing, website design, and website copy so that it is helping to elevate customer perception of your brand can help you to significantly reduce the chances of abandonment.
3) Improve brand loyalty
Alongside helping you to increase the overall customer conversions, improving the perceived value of your brand will also help you to boost brand loyalty. When you are able to exceed the expectations of customers both in terms of cost, quality, and service, they will be more likely to return and utilize your company again.
Improving loyalty is incredibly important, and research has shown that just a 5% increase in retention rates can boost profits up to 95%. This is a significant boost for any business and can completely transform your operations.
Higher brand loyalty can also help you to increase your reputation. Loyal customers will leave regular reviews and word of mouth recommendations, helping to combat any negativity that might arise.
Adopting a perceived value marketing strategy is an all-encompassing campaign that will typically cover a range of core areas, including:
- Aesthetic appeal and design of your product and branding.
- The value attached to your products or services by helping to save your customer’s time, effort, and money.
- Customer service, such as the ability for your customers to contact you out of the traditional 9-5 hours.
- How convenient it is for customers to access your company and services
- How easy it is for consumers to engage with your brand and purchase your products.
The perceived value of your brand is one of the most important aspects of your company. In this fast-paced modern world, consumers are bombarded every day with messaging from potential brands vying for their business.
This makes it incredibly difficult for companies to stand out from the crowd and drive new traffic towards their brand and convince those visitors to become customers. This means improving your perceived value will make you a vastly more attractive prospect to consumers and help you to maximize your reach and results.
Taking the time to research how your existing customers perceive your brand and the areas that you can improve, will ensure you can tailor your marketing accordingly. When you are able to effectively target those key points that drive the purchase making decision, you will be able to elevate your brand and increase your profits.
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