The Paradox of Perceived Value

Author
Elke Farnworth
Date
December 10, 2020
Category
  1. Branded pain relief is more effective.
  2. Neutrogena 50+ Sunscreen is better than Coles 50+ Sunscreen.
  3. We judge the quality of food by the environment within which we consume it.
  4. We will pay more for a MacBook when Windows can virtually do the same.
  5. We think we need the newest iPhone when the current one still works.

I could go on, but the truth is we don’t generally value 'things', we value meaning. We use marketing to add value to products by changing our perception, rather than the product itself. Rory Sutherland, the Don of advertising, admits "us advertisers are just really good at making new things familiar and familiar things new." Brands being the vehicle of the intangible value or as I like to call it, perceived value. You find the same formula, offering the same benefits at two different price points and two different locations yet we will still stand there and review the options, more often than not walking away with the personally more valued product. Powerful brands add intangible value to a consumption experience by adding excitement, pleasure, a sense of wellbeing, security or heightened self, thereby delivering more value than an unbranded product could ever achieve. It’s a paradox of perceived value. 

Re-Framing 

There’s one example advertisers draw on in history which exemplifies how you can turn nothing into something. In the 18th century, Fredrick the Great realised that if you have two courses of carbohydrates, wheat and potatoes, you get less fluctuation in the price of bread. However, there was a problem. Hash browns and potato bake were still to be invented so spuds themselves were merely boring and underwhelming in flavour. There are records in the 18th century where people were executed for refusing to grow potatoes so you can understand the extent of disgust for them. Fredrick the Great needed to frame the potato in a different light, so what did he do? He declared the potato as a royal vegetable meaning only the royal family could consume it. He planted a royal patch, with guards who had instructions to guard it night and day, but with specific instructions to not guard it well. It wasn't long until Germany had its own underground potato dealing racket. Fredrick the Great re-framed the potato from zero to hero (Sutherland, 2007). Nowadays you’d be searching to find someone who doesn’t appreciate this versatile vegetable.

Value, as represented by the brain, is comparative. It's not inherent in any external “object” but is merely perception based on many factors, including quality. Valuing something is personally constructed inside each of our own individual minds and is always subject to some other perception of another product or service. #SCIENCE.

The Placebo Effect 

Some view intangible value as the placebo effect of marketing. Like a placebo drug, it's not a matter of whether it actually works, it makes us feel better anyway.

Einstein famously said that “reality is merely an illusion, though a very persistent one”. What if together with the price, the reality - the effect or experience one gets from the product - changes? What if Codral branded Cold and Flu is better than the "cheap option"? What if Neutrogena Sunscreen was better than Coles brand? What if Apple is better than Windows? Sound like fiction? Maybe not.

There is a strong connection in people’s minds between price and quality. People generally assume that “you get what you pay for”, despite knowing this is not always the case.

The Internet's ability to allow people to exchange information en masse by instantaneously communicating about products and services was expected to see the need for distinct brands fade. In fact, the need for brands grew stronger and they keep gaining utility and value. Quality spoke volumes.

To Do

  1. Understand your value proposition.
  2. Read ‘When Brand Relevance Is Relevant’ .
  3. Understand what drives your customer and choose moments that matter. 
  4. Read ‘Make a Debut’.
  5. Note, content is still king.
  6. Set a price the makes it clear it’s a quality offer but maximise on your “take”.
  7. Develop a formal Brand Guide with April Ford. 
  8. Build the brand's online traction; get a website developed by April Ford.
  9. Read ‘How to grow your IG account’.
  10. Don't underestimate the importance of your product's appearance as it may discredit the value.

Final Thoughts 

Although I say this almost daily, "It is what it is" - it isn't. It is what we personally think it is. What costs us $500 in one context can be a curse. What costs us $500 in a different context we may welcome. Things are what we compare them to, yet we make the psychological perspective subordinate to everything else. Psychological value is often the best kind. It may not be the fastest way to convert customers as you must spend more time building loyalty, however, building perceived value in your product or service will be worth it in the end as you gain trust and loyalty. Customers who continue to walk away with your product instead of your competitor's are an opportunity to maximise customer lifetime value. Perception is everything.

At April Ford our purpose is to help brands build intangible value through creative advertising and marketing. Arrange a consultation today with us to maximise your value tomorrow.

Cheers!

Elke
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