- Customer perceived value defined
- Terms explained
- Customer perceived value approach: pricing
- 10 for $10
- The power of ‘9’
- Removing signs of monetary value
- Change the unit of measurement
- Customer perceived value approach: Credibility
- Customer perceived Value Approach: The Value of Time
- Time is more valuable than money
- Customer perceived Value Approach: Emotion Connection
- Conscious capitalism
- Sense of community within the tech startup world
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Consumers don’t purchase products primarily for their functions. In fact, function is simply a means to deliver what a customer really wants: 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.
Customer perceived value defined
When making a purchase, a customer values a product’s benefit higher than its function. For example, a customer doesn’t buy a drill to have a drill. He buys a drill to have the capacity to make holes. From most SaaS companies, people do not merely buy software, but rather solutions. How customers weigh a given solution may not depend entirely on how well the solution fits their needs. In fact, there are many factors at play in determining how a customer perceives a product’s value.
Customer perceived value often has little to do with actual price. Instead, it deals with abstract costs. Customer perceived value can be determined by the relationship between perceived benefits and perceived costs:
Perceived product benefits exist on three levels: physical, logical, emotional. For example, buying a new suit will help you stay warm (physical), land the new job for which you are interviewing (logical), and save you from the embarrassment of walking around naked (emotional). Perceived costs include money, time, and labor.
When comparing the difference between perceived benefit and perceived cost, if the difference is positive, customer perceived value is high, meaning customers will buy a product or service. There are many techniques companies can use to improve customers’ perceived value of their product.
Customer perceived value approach: pricing
While customer perceived value is figured using perceived costs, these costs don’t necessarily mean money. Price is not the most important thing in determining a customer’s perceived value. However, it does play a role. There are ways to increase a customer’s perceived value when tackling a product’s price. According to marketing writers, Neil Patel and Ritika Puri, “You need to choose numbers that will compel your audiences to buy.” They propose the following techniques to do just that:
10 for $10
When a consumer sees a deal advertised as “10 for $10,” he often assumes that he must purchase ten of the given product in order to obtain the deal price. However, this is often not the case. Usually, the consumer can buy one item at the advertised price of $1. Marketers use this strategy to influence buyers to load up on products.
The power of ‘9’
Also known as the “left-digit effect” or “charm prices,” the “Power of 9” pricing strategy plays on the concept that when a consumer reads a number from left to right, the last number he sees is the one stuck in his mind. For whatever reason, the human brain perceives the number nine to be associated with deals and discounts. One study showed that using this method increased sales by 24%.
Another study conducted by MIT and the University of Chicago found that women’s dresses were more likely to sell when prices at $39 than the lower price of $34.
Removing signs of monetary value
According to 2009 Cornell University research, consumers are less likely to make purchases when menu options include monetary symbols, such as $ or €, or monetary value words, like dollars or pounds. Simply being there, as an additional word or symbol, for a consumer’s brain to process changes his/her perception. A way to combat this is to list a price with simply a number. Clearly, this is easier said than done when considering an SaaS company who conducts business in many countries and currencies around the world. In such a case, an SaaS might consider a pull down menu at the top of their site, where consumers can choose their desired currency, and subsequently displaying the prices with numbers alone.
Change the unit of measurement
Another way to change a customer’s perceived value of a product through pricing is by changing the unit of measurement from money to other things that the same amount of money could buy. According to Dave Schneider, “people don’t derive direct value from money, they derive it from the things that money buys.” Dave cites a relevant example. Facebook purchased What’sApp back in 2014 for a dizzying $19 billion. However, the number had no real value or relevance until news outlets started illustrating what else Facebook could have bought. This included clean water for the entire planet priced at a mere (in comparison) $10 million. When we saw what else that money could have bought, we felt as though he had a better conceptual understanding of how much money $19 billion really is.
Customer perceived value approach: 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. With credibility comes higher levels of trust and satisfaction. Some great ways to improve your company’s perceived credibility score are through trials, testimonials, and partnerships.
When an SaaS company offers its clients a free trial, they are saying, “Please try our product. We want you to know that we stand what we sell.” This is a valuable way to show customers that a company stands behind its product. Additionally, according to 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.
Publishing customer testimonials on your website increases customer perceived credibility as it increases trust. If other customers have used a service or product and were happy with the results, then the company is successful in doing its job. Through reading positive testimonials from previous customers, a potential customer can trust that if he also purchases the service or product, he too will be satisfied with the results.
Testimonials are gaining force when approaching increasing customer perceived credibility, as traditional advertising methods fail to engage Generation Y consumers, who are steadily replacing baby boomers in both the workforce and the economic market. Since ads are increasingly perceived as untrustworthy, testimonials are a more palatable way to get your brand out there to prospective customers, who see advocacy as more genuine and weighty than ads.
Partnering with other companies can increase a customer’s level of perceived credibility. You should consider a few things when choosing with which companies you’d like to partner. By choosing the wrong companies, partnering could become detrimental.
Make sure your potential partner company has a solid reputation.
Pick companies that attract clients similar to yours.
Choose to partner with companies who share similar values.
Customer perceived Value Approach: The Value of Time
It is proven that the human connection with time is very strong. Perceived value of time is higher than perceived value of money. Marketers should take note of this on two levels: (1) time sells, and (2) consumers want purchasing to be convenient and free of time restraints.
Time is more valuable than money
The human relationship with time is much more personal than the human relationship with money. Because consumers don’t look to buy a product but rather the benefit that the product brings them, they are more likely to internally link that benefit with the amount of time spent enjoying a product. Advertisers know this and frame wording to incorporate the benefit of time enjoyed when using a particular product.
“Because a person’s experience with a product tends to foster feelings of personal connection with it, referring to time typically leads to more favorable attitudes—and to more purchases,” says Jennifer Aaker, the General Atlantic Professor of Marketing at Stanford Graduate School of Business.
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 SaaS companies. The latter offer software for that sole purpose, to expedite business procedures, by offering features that will facilitate the user’s work.
SaaS companies should consider offering intersite features, such as a “click-to-call” button. Such features make completing purchases, answering questions, and offering support easy, and, ultimately, expedite any assistance a customer may need.
Customer perceived Value Approach: Emotion Connection
One of the most effective ways to increase a customer’s perceived value is to appeal to his emotions or values. In order to do so, it’s important to know what types of things your customer might appreciate.
Conscious capitalism is a style of conducting business while also helping those less fortunate. The idea of conscious capitalism comes from a book written by John Mackey. “A certain amount of corporate philanthropy is simply good business,” says Mackey. Research seems to corroborate the theory that perceived value is increased when companies altruistically help a cause. “94% of consumers report that they would switch to a brand that supports a cause. 20% would buy a more expensive product if it supported a cause.”
Sense of community within the tech startup world
For tech startups, it’s important to respect and promote other tech startups. It’s as if there is a huge, extended family of which we are all a part. When considering with whom to conduct business, a consumer who is a part of one tech startup is likely to choose to do business with another tech startup. Because customers within the tech world understand the difficulties that go hand-in-hand with starting a tech company, their perceived value of other tech startups is increased.
Locality is a huge part of customer perceived credibility as people want to support their own communities. Terms like “locally made” 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.
Using a local number increases perceived credibility. For example, when receiving a cold call, people are more likely to pick up an unknown number if it has a local area code. The simple touch of calling from a local number increases perceived trust.