Thread by @ronaldnzimora

How To Use the Concept of "Perceived Value" Sell More of Your Products and Services

A Thread.

Why would someone who wants to both (a) attend a training that costs =N=50,000 ($136) and (b) buy a plot of land at Ibeju-Lekki for =N=5 million ($13,600) struggle with justifying...

paying for the training but easily decides to pay for the land?

The answer is PERCEIVED VALUE.

You see everything you sold and everything you buy has two values attached to it.

The real value and the perceived value.

The real value is exactly what it's worth right now, how...

much it cost to produce the product, how useful it is to the buyer and how much value its individual components (if any) have.

Perceived value is an abstract representation of how much prospective customers feels a product is worth.

Real value is generally easy to measure.

As a business owner, to calculate real value, you simply account for costs of labour, raw materials, shipping, marketing and product development, and you then add a markup which allows you to determine the product's real value. This is in your hands and is as determined by you.

Perceived value is harder to determine. And it's all in the mind and hands of the buyer.

A buyer bases their judgement of the value of your product/service on factors like: scarcity (including artificial scarcity), marketing, novelty, brand associations, expected benefits etc.

Consumers don’t purchase products primarily for their functions.

In fact, a product's function is simply a means to deliver what a customer truly wants: the benefit. A customer buys a product for the perceived benefit he will gain from it. This perceived benefit, in addition...

to his opinion of the product, are what create customer perceived value.

How does this play out in real life?

People perceive the value of a training as a one-time benefit. But they perceive the value of land as something that appreciates year on year, almost in perpetuity.

Another: two auto companies may manufacture and sell similar cars that cost the same amount to produce,giving them identical real values.

However, one car will likely have a higher perceived value if its maker has a reputation for reliability and the vehicle itself as one of...

higher second hand value. For example, in Nigeria, Toyota cars have a higher perceived value than say a Ford.

Now you know what blows the mind? This perception may be flawed, it could be based on wrong information and data and it still will not matter. All that matters is...

if people believe it, it stays, and their buying behavior and pattern follow that train of thought.

Why would people do this? Because value is something very personal. It’s different for each and every one of us. In other words, there’s no such thing like “real value”.

Huh?

Yes. It obviously exists but when you're trying to sell, it's useless to focus on it.

In the marketplace, all that we call "value" is in fact PERCEIVED VALUE, and it's unique for each and every one of us.

When making a purchase, a customer values a product’s benefit higher...

than its function.

For example, a customer doesn’t buy an electric drill to have an electric drill. He buys the drill to have the capacity to make holes very quickly and cleanly.

Most companies do not buy consulting, but rather solutions to difficult operational problems.

Women don't buy hair because they like stitching synthetic material to their scalp. They are buying a specific kind of look.

Customer perceived value often has little to do with actual price or product design per se. Instead, it deals with abstract things. Things they would...

get in exchange for what and how much they're paying.

Here's what a prospective customers thought process would look like if it was an equation to explain it.

Perceived Benefit - Perceived Cost = Perceived Value

If the "Perceived Cost", in their mind, outweighs the...

"Perceived Benefit", they will decline and refuse to buy, (unless they don't have a choice and their life depends on it) as the value in their mind is at or near zero.

If the "Perceived Benefit" outweighs the "Perceived Cost", they will buy as long as they have the money...

available, because the Perceived Value is at or close a 100.

Everyday, people do this math in their heads several times as they make decision on what to and what not to buy.

So as a business person, your question is: how do I position my product in such a way that it creates...

a very high perceived value in the mind of the buyer?

Here are some ways.

1. Presentation: Say you want to impress a lady you've wanted to get to know and you want to make a good first impression, you'd take her on a date to a nice, clean restaurant, or a much classier one...

depending on your budget. You wouldn't take her to a roadside dirty "Mama Put" filled with street urchins and flies struggling for spaces with humans (never mind what these cry babies on Twitter call "testing the lady" whatever that means).

Presentation matters and sways...

perception and purchase behaviour.

2. Credibility: When a customer attaches a high level of perceived credibility to a product or company, he is more likely to buy that product or do business with that company.

Consumers are willing to pay more for brands with a reputation...

for quality.

I recently paid to most people a dizzying amount of money for a ROLEX watch. I was comfortable paying that much because of the name and it's hundreds of years of rich, documented history.

Did I verify this history? No. I simply read and heard it told hardly...

even where and the brand is worn by many of society's high rollers, some of who I admire and look up to. If it's good enough for them, it's good enough for me too.

2. Installment Payments: Installment payments increase the perceived value of a product or service by making...

buying easier to buy and seemingly affordable.

Now instead of paying out the full price right at the start, you can spread the purchase cost over a longer period of time.

Because the entire price is not being paid for at once, it's easier for people to justifying buying...

since all it costs them is a smaller affordable amount each month.

We see this strategy employed by companies who sell IT gadgets, automobiles, office equipment and real estate.

3. Convenience: Consumers are more likely to make a purchase if they find that a product/company...

makes the use of their time more efficient. This is especially true for companies that deliver their product over online platforms.

For example: we tripled the sign up rate for our client, NairaBET, by reducing the registration form fields from 14 to just 5.

This expedited...

the sign-up process, saves them time and make it less painful to join.

Offering features such as a “click-to-call” button for reaching customer care, auto-filling forms for returning customers, easy checkout, etc, ultimately, make using a product very much easier.

4. Trials: This works best if you're say a SAAS company. The really smart ones force you to try their software for free for the first 30 days, after which they begin to bill you.

It's more like, they are saying, “Please try our product for free for some time. We want you to...

know that we understand what we sell.”

It is a valuable way to show customers that a company stands behind its product. Additionally, according to the data analytics form, Kissmetrics, customers are often apprehensive to give their credit card number to purchase a software...

or product that they have never used. Giving customers a chance to try the product for free decreases this apprehension and eliminates customer perceived risk.

5. Testimonials: Publishing customer testimonials on your website increases customer perceived credibility as it...

increases trust. If other customers have used your service or product and were happy with the results, then your company is successful doing its job.

By reading positive testimonials from previous customers, a potential customer can trust that if s/he also purchases, they...

too will be satisfied with the results accruable from the service or product.

6. Emotions: A very effective way to increase a customer’s perceived value is to appeal to his emotions or values. To do so, it’s crucial you know what types of things your customer might appreciate.

For example, due to our culture, most Nigerians have an emotional connection to land and "roots".

That's why they value a land purchase far higher than buying a training, even it the former costs 100 times more.

7. Locality: Locality is a huge part of customer perceived...

credibility as people want to support their own communities.

Depending on area and how people perceive their locality, terms like “locally made and handcrafted in...” are more common now than they have been in 100 years.

Not only are locally conducted businesses better for...

the environment, they’re also better for local economies and local communities. Doing business with a local company is a small way that a consumer can feel as though he is supporting his community. Some people value that.

These are some way you can use to beef up...

your product's perceived value so you can sell more.

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