Perceived Value Theory 101
You’re about to rescue a child stuck on the ledge of a cliff.
There are two bags in front of you. Each bag contains a rescue kit.
Here’s the kicker:
One was made in Germany. The other in China.
Which one would you pick?
The bag you choose shows that you attach more value to that country for life-saving gear.
This is what you call perceived value. And it drives every decision we make.
Why is perceived value important in marketing?
It could make or break your business.
“Perception is reality. If you are perceived to be something, you might as well be it because that’s the truth in people’s minds.” Steve Young
There are two elements to perceived value. These are the customer’s perception of your product and the price he is willing to pay for it.
Here’s how this works:
When your customer feels that your offer has more value than the material and mental cost, then you tip the fulcrum in your favor.
That’s easy to understand, right?
But here’s the deal.
Perceived value is very personal and highly subjective.
It has nothing to do with numbers, logic, or manufacturing cost.
It has everything to do with perception.
And you know what? That’s good news.
Because perception is malleable. If you have a stellar product to start with, you’re more than halfway there.
Emotion is the ruler of perceived value
People buy with their emotions.
Without it, the brain can’t make a decision as neuroscientist Antonio Damasio finds.
When a person decides to buy something, it may feel and look like a very logical data-driven behavior.
But the truth is that this decision is influenced by subconscious motivations.
And if you want them to give you a time of their day. If you want them to buy your stuff. You need to find a way to get inside the inner sanctum of their brains and do this one thing:
Make. Them. Feel. Good.
But when you position yourself as the answer to their primal needs, your perceived value goes up.
How the lobster increased its perceived value and why you should too
Lobsters were once a pest of the earth served only to the lowest people in society.
Even in the harsh penal environment of early America, some colonies had laws against feeding lobsters to inmates more than once a week because it was thought to be cruel and unusual, like making people eat rats. –David Foster Wallace
But look how far the lobster has gone! From abhorrent prison food to exclusive and expensive delicacy.
Talk about a 180-degree turn-around in perceived value.
So what can you learn from this lobster story?
Increase your perceived value and you’ll make more money.
1. You can charge more and your customers will not flinch
The more value your customer feels for your products and solutions, the lesser it is for money to be a concern. His question will no longer be, “Can I afford this?”
Instead, he’ll be asking, “Can I afford to live without it?”
And if you’ve communicated your value well enough, he’ll gladly take out his credit card knowing that it’s going to make his life better.
2. Your store’s conversion increases
Then increase your perceived value.
The good news with online stores is that it’s easy to tweak your site design and web copy to influence customer perception.
3. You have staunchly loyal customers who will walk on fire for you
Perceived value benefits many of the other facets of your business.
Nowhere is this more apparent than in customers that become your flag-bearers.
They’re the customers who stand in line for hours to wait for your newest products.
The customers who are full of praises for you and defend you when someone talks trash about your company
They’re your valuable unpaid employees. The company assets every business dreams of.
Your customers own their perception of you
Your customer is the hero, the star and the heartbeat that drives perceived value.
If there’s only one lesson you can learn today, let it be this.
Don’t be arrogant and impose values you think will be good for them.
Look at it from their point of view: their exact words, motivations and inclinations.
Just because you think something is good for them doesn’t mean they’ll care about it.
Think about it this way:
If they don’t care about it, they will not value it.
When they feel there’s no value in it for them…
There goes your business down the drain.
So when you brainstorm ways to increase your perceived value, make your customers the be all and end all.
If you focus on anything else, it’s a useless exercise.
How to influence perceived value
Let me tell you a powerful secret that businesses use to influence perceived value.
This is when you alter the way you express something with the purpose of changing someone’s perception.
Think of the ugly duckling who turns into a beautiful swan.
She’s fundamentally the same. But the way she looks at herself has changed.
And this is your goal when you reframe: to make a person see something from a different point of view.
But exactly how do you do this?
Here are 10 popular reframing methods that will benefit your bottom line.
The power of luxury
The desire to collect upmarket goods is very strong for many people.
It’s so strong it fuels the luxury market.
Sure, people will find a logical reason why they buy a Hermes Birkin bag, a Bentley or this $47,000 crib.
But it boils down to one thing:
…people will pay disproportionately to feel significant. And this can be true even if the purchase is a gift for someone else. Because they subconsciously believe that giving someone a gift will get them attention, appreciation, or even love, which ultimately means one thing — significance.
So how do you convey luxury in online marketing campaigns?
Here are five rules from the 24 anti-marketing laws that you can apply in your marketing now.
- Keep non-enthusiasts out
- Make it difficult for clients to buy your product
- Don’t respond to rising demand.
- Raise your prices as time goes on, in order to increase demand.
- Keep raising the average price of the product range.
- Here’s the full list
FOMO is your friend
FOMO (fear of missing out) is real.
It’s not just a millennial’s dilemma.
And my, it’s a formidable ally in your arsenal when influencing perceived value.
It works so well that it’s one of the most common ways internet companies increase website conversions.
The fear of losing something (“there’s not enough of this for everybody”) drives our brain haywire and compels us to want it more.
You see this when parents sacrifice limbs to get the must-have toy every Christmas,
As human beings, our fear of loss is very dominant, that we will risk so much when faced by such a situation.
So knowing this principle, what can you use on your site?
Here are effective tactics for your product pages that use the scarcity principle.
- 20% off until the end of the month
- Limited to only 2 items per buyer
- Price good while supplies last
- Price increases in 2 days
- Lightning deals
A word of caution:
Be truthful when you use this method. Consumers are a smart bunch. And you don’t want to lose your credibility.
There’s nothing more devastating to perceived value that lost trust.
Behold the power of an influencer
When Kate Middleton wore this dress during her Asian tour, it sold out in less than an hour.
That’s the power of an influencer.
But you don’t have to wait for for the duchess to wear your products or pay a Kardashian for a brand deal.
Know your customers and find an influencer that’s closest to their heart.
Look for bloggers and social media influencers that get your target market.
Develop brand partnerships and start an influencer program.
When you’ve got this in place, you find that the more influencers talk about your brand, your sales increase as well – as Anita Elberse finds in this study on the economic value of celebrity endorsements.
Take them on a journey behind the scenes
People are nosy.
We know it’s frowned upon. But we secretly like knowing other people’s business.
It’s why vlogs of people doing nothing rack up millions of views on Youtube.
It’s why Instagram posts document everything from exotic places to childbirth.
It’s why we like watching movie bloopers.
We like the stories they tell. They make someone who’s not within our social circle feel closer and human like us.
“Stories are powerful because they transform us into other people’s worlds, but in doing that, they change the way our brains work and potentially change our brain’s chemistry. And that’s what it means to be a social creature: to connect to others, to care about others, even complete strangers.”
When a story is scripted well, it flicks a switch and sparks a fire in our brain and desires.
This is why stories inspire people to take action.
At a bigger level, they can start a revolution.
On a smaller scale, they can motivate people to buy your products.
Why? Telling stories creates an emotional bond between you and your customers.
And remember the basic law of perceived value? It’s how you make your consumers feel.
When you make them feel good, they attach good feelings to your brand.
And when this happens, your value increases.
Show credibility through social proof, testimonials, videos, etc.
You can toot your horn all you want.
But getting someone else to do the bragging for you is 100x more effective.
Start with customer reviews. This is a staple in any web business that consumers expect it. If you don’t have it on your site, fix it right now. It’s an easy way to show your value to every person who lands on your site.
Another thing that requires little effort is adding trust symbols.
These are third party organizations that consumers already trust. Put their logos on your site and by association, consumers transfer their trust on you.
So what are these symbols of trust?
These are logos or certifications that the people you want to reach care about such as Fairtrade, USDA certified product or the Better Business Bureau.
And don’t forget to add some trust signals that online buyers associate trustworthiness with like Visa-Mastercard, Paypal verified or Mcafee secure.
Experiment with the magic of pricing high
Let’s say that tonight, you have a date with the woman of your dreams. You’ve been looking forward to this date. You know she’s the one to marry.
Two hours before meeting her, you get a massive headache. You go to the pharmacy. There are two brands of painkillers. One is three times more expensive than the other.
Would you buy the cheaper or the expensive one?
If you choose the expensive one, you’re in the same boat as most people.
This is what Baba Shiv, Rebecca Waber, Ziv Carmon & Dan Ariely found out when they conducted a study to see the difference in perception when using painkillers with different prices.
In the study of painkillers, researchers applied electrical shocks to the wrists of study participants before and after they took a placebo they believed was a pain pill. When the results were compared, 85 percent of the patients who believed they were taking the expensive pill reported a reduction in pain from the shocks compared to 61 percent for those in the low-priced sample group.
People have a non-conscious bias for more expensive products, as this study shows.
So what’s a quick thing you can do to increase your value?
Sell your products at a higher price than the norm in your market.
End prices with this number for high conversion rates
This is a very easy tweak.
Change the ending of your prices to 99.
So, $2.50 becomes $2.99. $4 becomes $3.99 or $200 becomes $199.
If you have any doubts, just look at Gumroad’s conversion rate chart comparing different price points.
Website design quick wins
Here’s the reality:
People don’t like to work when they land on a site.
As soon as your website feels like it’s going to take more work than most, they leave.
Page taking to long to load? Poof. They’re gone.
Forms have too many lines to fill in? That’s it. They’re not doing it.
Web navigation in places they’re not used to? Don’t even think about it.
This is also true with their feelings for your brand.
As soon as they land on your page, they immediately decide if they want to stay or not. Whether it’s a website that gives value or extra work to their busy lives.
This is why every single thing on your site needs to have a purpose. Every element, every design is there to attract your user to stay, to make his life easier, to make him feel good.
Do this and you’ll improve your perceived value.
There are a few things you can do to engineer this.
Choose color combinations that reflect your brand
Different markets. Different colors. Different feel.
Want to know more about colors for your web design projects? Read this massive guide on color Psychology
Make your homepage sticky
Many of your visitors may not land on your homepage. But if they like the first page they land on, they will click to the homepage to find their bearing.
So make your homepage clear and free of clutter.
Communicate your value accurately and leave no room for doubt
Body language and tone of voice play an important part in effective communication.
But you don’t have this luxury on your website.
You may have the best product in the world, but if the words on your sales page don’t jump into the hearts of your readers, you are no different from a business that doesn’t have an online presence.
Effective site design and copy can work wonders to reduce friction for your visitors, but you need to know what to look for and how to eliminate it. – Joanna Wiebe
So what do you need to do? Joanna explains the 5 things you always need to keep in mind:
- Write copy that reflects motivation.
- Craft a value message that tells readers they’re in the absolute place they wanted to be.
- In cases when you have incentives like free shipping, discounts or special offers, then flaunt them front right and center.
- Find the parts on your site that create friction and eliminate them.
- Find what stresses your customers on your site and present them in a way that makes the worry disappear.
I’ve given you a lot of things to implement.
Whatever you plan to do next, remember this one important thing:
Perceived value belongs to your customers.
Keep this in mind next time you write your website copy or execute your marketing campaign.
When you do, you trigger the happy centers in their brains and you leave them with no choice but to buy what you sell.