Perceived Value - A marketer's dream

[prawn_86]

Ok, due to popular demand (haha, i've always wanted to say that), i thought i would start this thread up. I actually have an exam later today so i'll keep it fairly brief for now.

As with any academic discussion we need to start with a definition. Perceived value is the value that a customer/client is willing to pay for a product or service. For marketers, basically Profit = Perceived Value - Costs. So a marketer can either try and reduce costs (which can only be done to a point), or increase the perceived value of the brand (which, in theory, can have unlimited upside).

How do i do it? You ask. Good question. If i knew the answer i wouldnt be here : As with most things in business, there is no right or wrong way to go about it. The theory is simple, provide something that doesnt cost much, but that consumers are willing to pay a high price. Methods used to create this value are varied, depending on the actual product. It could be high quality, it could be well advertised, it could be low quality but deemed 'cool'. As i said there are infinite combinations, it seems to be more of a case of "trying lost of things and keeping what works" (to quote Pauling).

Examples include:
Luxury brands. Its interesting to note, that now days the quality is often not that much better than other products, yet people are still willing to pay for the brand. 'Pop' culture and media plays a part in this.

Toyota and Lexus. This is a classic uni example. A lexus isnt that different to a toyota (car buffs may argue, but i dont know much about cars). Lexus have more leather, finer tuned engines etc, but the effort that goes into that tweaking is massively rewarded by the significantly higher price people pay for Lexus'. Interesting to note that if Toyota bought out a Lexus, but branded as a Toyota, it wouldnt fetch the price premium. This shows the importance of branding. Sometimes its better to start a new brand, than try to drastically change the image of an already established brand.

I seem to be rambling on, in typical academic fashion, so i'll leave it at that.

Comment/thoughts?

 

[skc]

Re: Perceived Value - A marketers dream

Trading education is the classic example.

Costs = bugger all after the 5th seminar
Perceived value = depends how gullible people are

Edit: Come to think of it, is this where you got the idea to start this thread?

 

[prawn_86]

Re: Perceived Value - A marketers dream

Trading education is the classic example.

Costs = bugger all after the 5th seminar
Perceived value = depends how gullible people are.

Yeh, trading is a good example, whcih was talked about in the other thread. To me, it comes about due to two things. Greed and laziness. People want a get rich quick scheme, but want to put very little or no effort in. Add in a bit of a slick sales pitch and there is always someone to take it up.

Again i think the media has a lot to do with this, as they are constantly showing rich 'investors' etc who have made it big, but rarely do they show or emphasise the work that has been put into it.

I think a long time ago Wayne had an example to do with options. Get half to buy calls, half puts. After each expiry do the same again with the winners and repeat, one person is bound to come out with money in the end and recommend your product. (Please correct me if im wrong with that Wayne, im green to options)

 

[investorpaul]

Re: Perceived Value - A marketers dream

The Toyota Aurion was initially designed to be a Lexus, however early feedback/focus group analysis suggested a wider target market so they removed some of the wizz bang stuff (leather, GPS, etc) badged it as a Toyota.

 

[gooner]

Re: Perceived Value - A marketers dream

And that is why I own a Toyota and not a Lexus - I only pay for what has value.

Although my wife would say that I am just a tightwad

 

[prawn_86]

Re: Perceived Value - A marketers dream

And that is why I own a Toyota and not a Lexus - I only pay for what has value.

No you only pay for what you perceive has value.

That is the other difficult thing with marketing, everyones perception is different, so you need to make sure that you can create enough people with high perceptions of your brand.

 

[wayneL]

Re: Perceived Value - A marketers dream

Yeh, trading is a good example, whcih was talked about in the other thread. To me, it comes about due to two things. Greed and laziness. People want a get rich quick scheme, but want to put very little or no effort in. Add in a bit of a slick sales pitch and there is always someone to take it up.

Again i think the media has a lot to do with this, as they are constantly showing rich 'investors' etc who have made it big, but rarely do they show or emphasise the work that has been put into it.

I think a long time ago Wayne had an example to do with options. Get half to buy calls, half puts. After each expiry do the same again with the winners and repeat, one person is bound to come out with money in the end and recommend your product. (Please correct me if im wrong with that Wayne, im green to options)

Close enough Prawn Here's another example:

Suppose I had a system I was selling.

I've run a sim on excel, 200 iterations of a trader starting with $1,000; analogous to selling 200 systems to real people. At the end it is likely I could market something like the following:

Starting with only $1,000 capital;

Joe Sixpack made $3,500 profit.

Hooray Harry made $4,500 profit.

Sweet Fanny Adams made $2,012 profit.

Schmuck Tuckus made a whopping $7,216 profit

etc etc etc - ad bleedin' nauseaum

ALL IN ONE AFTERNOON!!!!

Look vaguely familiar? Anyone who's received any sort of trading course spam will have seen similar.

The perceived value (with a bit more padding and BS than what I've added) would be quite high.

The System?




...




...




...



...



Tossing a coin and betting with 10% fixed fractional position sizing... that's it!!

Of course there is much that I didn't say, such as the fact that 75% LOST money, in many iterations over 90% loss.

I had a mate who bought a horse racing betting system for $25,000, and this was back in the days when 25k was probably the same as $50k 2009 dollars.

It was essentially an elaborate martingale system. A worthless product/system with a high perceived value.

 

[Ageo]

Re: Perceived Value - A marketers dream

hmm perceived value eh?? ok ill take a stab on behalf of the jewellery industry.



Lets take a look at 2 items of jewellery

* 9ct gold jewellery imported from italy
* Pandora Silver jewellery

Ok true value has it that the 9ct gold will always be valued more compared to silver jewellery hence the metal value.

Heres the tricky part, pandora jewellery sells for sometimes well over the 9ct gold jewellery prices. People are paying $200 and sometimes well upto $1000 for silver jewellery. If they had to scrap their jewellery in it would be worth peanuts, whereis the 9ct gold would retain strong metal value.

At the end of the day thow pandora has marketed well and its perceived value is the highest among any other silver jewellery out there. I know jewellers that make $10,000 per month just on pandora.

You see they have it made in Thailand, so it might cost all up $1 per gram (50c metal, 50c labour), but when they sell it, its safe to say they sell for at least $20 per gram so as you can see there is some huge margins to be made.

Anywayz thats my little experience on perceived value.

 

[investorpaul]

Re: Perceived Value - A marketers dream

At the end of the day it all comes down to the power of marketing.

For example Nike sponsor sports men/women all around the world due to their public appeal and success at their chosen sport. A percentage of people therefore associate greater success with that brand (even if they deny it). Those people are therefore happy to pay for that additional perceived value.

The value they get is not shoes to keep there feet comfortable while running but they get associated with the brand and the success of the sports people who wear it. I.e they want to look "cool" and up to date.

As people age/mature their perception of value changes (for the majority of people). Hence my dad buys sneekers at big W rather than Hype or some other high end shoe store. They no longer have the desire to be associated with a the brand because they dont see the "value" in paying $250 for sneekers with a big tick on the side when they can buy another pair for $50. Effectively both pairs serve the same purpose and hence there is better value in the cheaper pair.

 

[prawn_86]

Re: Perceived Value - A marketers dream

Effectively both pairs serve the same purpose and hence there is better value in the cheaper pair.

From a functional perspective perhaps. From a emotional perspective, definitely not.

That brings us to the next stage:

Function - What does the product/service do? (this is rather limited)
Emotions - How does the product/service make you feel? (this is marketing gold and where the bulk of perceived value comes from)

 

[Timmy]

Re: Perceived Value - A marketers dream

Good stuff Prawn, thanks.

(Don't forget the exam)

 

[overit]

Re: Perceived Value - A marketers dream

Can you find a better example of perceived value than the art industry. I could whip something like this up for $30 in about 10mins. Talk about a marketers dream!

Worlds most expensive paintings

This painting is worth $140million!

 

[Julia]

Re: Perceived Value - A marketers dream

Interesting topic, Prawn.

A good example of perceived value, particularly with the emotional appeal, is moisturising creams. Choice have repeatedly shown that ordinary old Sorbolene is as effective in moisturising the skin, including reducing the effect of wrinkles in older people, as a pot of something with a sophisticated name and marketing programme that costs $70.

Some of these products say they contain 'special ingredients' to 'guard against the effects of ageing' etc. Choice say if they do, they are in such tiny quantities as to be immaterial.

But women particularly will buy the expensive cream in the belief it will be more effective. They probably then read all the advertising for expensive creams in order to reinforce this purchase and discount any information detailing the benefit of something much cheaper.

 

[tech/a]

Re: Perceived Value - A marketers dream

Sensational topic.

Percieved value may well be a real value.

Your client hasnt recieved "The Value" and as such has a perception.
The best way I have found to build this perception in a BUSINESS and ultimately deliver it is through building relationships.

TRUST.

Business is truely about building relationships.
A true business will build itself on the developement of perceptions of trust and value honed on relationship building.

They will build relationships with
(1) Clients
(2) Suppliers
(3) Staff.

Each will have their own perception of value.
Each will guage value differently.
Each will have different "values" to fill.

We often have long term competitors who we have built a relationship with (Joint venture partners) who call and lament.
"How'd you get that project we know we were $1000s cheaper?!"

As price deviates away from bargain pricing percieved value---TRUST plays a larger role.
If you didnt like the person your dealing with chances are that at low value items it wouldnt matter much---particularly if it represented a bargain--youd buy it.

But if it was a high priced ticket item you'd pull back and more than likely go with people you felt represented saftey and trust.

As an employee your going to look more for a percieved value in job security if your commitments are high.
Less commitment and quite possibly your perception of better value wages will take precedent---even if short term.

We build or fail to build Percieved value through relationships or lack there of---in business.

Business will get more from their Clients/Suppliers/and Staff if they work tirelessly on their relationship building ---delivering a percieved value/benifit to the participants.

 

[haunting]

Re: Perceived Value - A marketers dream

Hope this helps.

Marketing and advertising and Your cognitive bias

** I agree trust gained through long term business relationship is the key for many future business success. This is particularly true in Asia where "laws and legality matters" are not clearly defined or enforced by the authority.

 

[theasxgorilla]

Re: Perceived Value - A marketers dream

Cloud computing, Google Apps, it costs $350 AUD/hr for a consultant right now. Thats solicitor rates for something that can ultimately be supported by uni students.

 

[jono1887]

Re: Perceived Value - A marketers dream

 

[jono1887]

Re: Perceived Value - A marketers dream

Apple has been the master of perception for years, they're only computer/mp3 manufacturer that is able to convince users to pay 2-5x more than other brands for almost exactly the same product.

 

[prawn_86]

Re: Perceived Value - A marketers dream

A good example of perceived value, particularly with the emotional appeal, is moisturising creams. Choice have repeatedly shown that ordinary old Sorbolene is as effective in moisturising the skin, including reducing the effect of wrinkles in older people, as a pot of something with a sophisticated name and marketing programme that costs $70.

Yeh, and with something like this, it brings a kind of placebo effect into play. If you can convince customers that youir product is actually different (and playing on vanity is a good strategy), then of course they want to notice results for their money, so will quite often just see or feel things that are not there.

Percieved value may well be a real value.

There is no doubting it is real value, its just that everyones perception differs, so what may be value to one person, may not be valuable to another. Thats why the term perceived value is used.

And trust is a good one to use in business, especially if you're in an industry where repeat purchase is possible/important. Also in business to business markets trust playas a much larger role than in bus to consumer markets (generally speaking)

 

[It's Snake Pliskin]

Re: Perceived Value - A marketers dream

Ok, due to popular demand (haha, i've always wanted to say that), i thought i would start this thread up. I actually have an exam later today so i'll keep it fairly brief for now.

As with any academic discussion we need to start with a definition. Perceived value is the value that a customer/client is willing to pay for a product or service. For marketers, basically Profit = Perceived Value - Costs. So a marketer can either try and reduce costs (which can only be done to a point), or increase the perceived value of the brand (which, in theory, can have unlimited upside).

How do i do it? You ask. Good question. If i knew the answer i wouldnt be here : As with most things in business, there is no right or wrong way to go about it. The theory is simple, provide something that doesnt cost much, but that consumers are willing to pay a high price. Methods used to create this value are varied, depending on the actual product. It could be high quality, it could be well advertised, it could be low quality but deemed 'cool'. As i said there are infinite combinations, it seems to be more of a case of "trying lost of things and keeping what works" (to quote Pauling).

Examples include:
Luxury brands. Its interesting to note, that now days the quality is often not that much better than other products, yet people are still willing to pay for the brand. 'Pop' culture and media plays a part in this.

Toyota and Lexus. This is a classic uni example. A lexus isnt that different to a toyota (car buffs may argue, but i dont know much about cars). Lexus have more leather, finer tuned engines etc, but the effort that goes into that tweaking is massively rewarded by the significantly higher price people pay for Lexus'. Interesting to note that if Toyota bought out a Lexus, but branded as a Toyota, it wouldnt fetch the price premium. This shows the importance of branding. Sometimes its better to start a new brand, than try to drastically change the image of an already established brand.

I seem to be rambling on, in typical academic fashion, so i'll leave it at that.

Comment/thoughts?

Thanks Prawn for your efforts in parting with knowledge you have accumulated. What an interesting topic!

I recently heard a docotr talking on radio about this and how people would listen better if they were paying more for his services.