This is a question customers ask themselves every single time they are considering paying money for your product or service. As economic conditions have changed and cheaper priced products improve quality, it becomes more and more important for you to continue to ask yourself “Is my product worth the price?” Every business person should ask themselves this question at least once a month. The answer to this question should be a resounding yes and you should be able to quickly articulate 3 reasons why. Chances are if you can’t quickly answer this question then you are at risk of losing sales or never getting them.
A customer’s perceived value of a product or service has very little to do with it’s actual market price. The value of the product is driven by it’s ability to meet a customer need or want (or benefit). There is a very simple equation used to express the relationship between value perception variables: Perceived Value = Benefit/Price. In other words, if you convince customers that your product’s benefits are much more valuable than the monetary asking price, then they will buy it.
Grasping this concept is particularly important in three scenarios: 1) If you have a new product/ service, 2) If your product/service is priced at a premium versus competition, and/or 3) If you are trying to grow sales.
The following 5 strategies can be used to help elevate your product or service’s perceived value:
1. Build an emotional connection with customers
A brand’s growth is severely limited if it lacks an emotional connection with consumers
Example: The actual Coca-Cola product is just water and syrup mixed in a bottle. Building an emotional connection with consumers has been the key to Coca-Cola’s long-term success. Through strong emotional connections, Coca-Cola has been able to command a premium price and maintain its global category leadership position even through times of economic instability. $1.25 seems like a lot for 12 ounces of syrup in a bottle but its nothing when re-framed as the un-priceable value of happiness and nostalgia.
2. Focus On One Key Benefit That Commands The Higher Price
Communicating that the product has one key benefit that makes it superior to other products
Example: Reebok launched Reebok Pumps in 1989, as a basketball high-top shoe. The shoe was quite expensive compared to other retail athletic shoes at the time, often costing as much as 150% more than the next most expensive athletic shoe on the market. Reebok’s messaging convinced consumers that the pump mechanism made this shoe a better quality product than any other athletic shoe in the category, commanding a premium price.
3. Make Cost A Secondary Consideration In The Purchase Decision
The product benefit outweighs the price so much that customers don’t even care how much it costs
Example: While you may consider Mercedes-Benz a luxury car maker, it has the potential to save your family’s life with its 120 built-in safety features. Mercedes- Benz launched a campaign in Australia based on the premise that there is no price tag too large when it comes to safety. The campaign was so successful that it was adopted and re-applied across the globe. On the company’s website, the heritage of safety is distilled into a simple tagline, “Decades of preparation. Milliseconds of proof” that precedes a couple of paragraphs reassuring consumers that safety is still a top priority.
4. Encourage Indulgence
Convince consumers that they deserve to spend more to pamper themselves or loved ones
Example: Encouraging indulgence has helped Godiva Chocolatier be very successful in a market that some would argue is fairly commoditized. The premium chocolate company weathered the recession better than many other luxuries because, like an upscale cup of coffee, even an expensive chocolate is a relatively inexpensive way to indulge. Godiva has been able to increase purchase occasions and encourage consumers to indulge more often, resulting in double digit sales growth each year, for the past 3 years.
5. Create A New Category
Convincing consumers that your product is so superior that it can’t be compared to any other product on the market
Example: Starbucks has been able to breakthrough the confines of a once commoditized market. The key to Starbucks’ success is the message of superiority. Any Starbucks’ stakeholder (especially employees and consumers) would be outraged if you compared Starbucks to any other coffee product on the market. By focusing on superiority, Starbucks elevated their brand to create a new category that carries its namesake. Starbucks = is Starbucks and every other coffee product is referred to as just coffee.
Investopedia.com defines perceived value as the worth that a product or service has in the mind of the consumer. The consumer’s perceived value of a good or service affects the price that he or she is willing to pay for it. For the most part, consumers are unaware of the true cost of production for the products they buy. Instead, they simply have an internal feeling for how much certain products are worth to them. Thus, in order to obtain a higher price for their products, producers may pursue marketing strategies to create a higher perceived value for their products.
My name is JT Johnson. I am a passionate Brand Marketer, Business Strategist, and a Life-long Learner. I have extensive hands- on experience developing holistic marketing campaigns that drive long term profitable growth. I have had the amazing opportunity to help build some of the most respected brands in the world. I have led holistic business plans from consumer insight and concept development to product launch and in-store activation.