The Perception Of Value And The Decision To Buy

Why do people buy your products? Why do they purchase any product or service? One thing’s for certain, it’s not about the price.

It’s a common fallacy that people buy based on price. Well some do, but most people buy based on value or rather their perception of value. Many small business owners begin their business life with the thought that they will enter their market and simply offer what they have at a slightly lower price and all will be good. In truth it’s not the best or even a good idea. Unless your last name is Walton and you’re an heir to the Wal-Mart throne you won’t be able to compete on price nor should you try.

Instead you should compete on value and everything on your site from the inital perception of your design to the way you walk potential customers through the sales process, should be about increasing the perceived value of your products and services in the eyes of your potential customers.

Value At The Supermarket

Think about your last trip to the supermarket. You probably bought a few generic items, but if you’re like most people you also walked out with a few brand name items in your shopping cart. Why? Are those brand food items really any better than their generic counterparts? In some cases maybe.The are a few brands I think taste better. At least I have convinced myself somewhere along the way they taste better and I’m willing to pay a little extra for that better taste real or not.

Do you ever compare ingredients between brands? If you do you’ll find that many times what’s in the brand is exactly the same as what’s in the generic. In fact some brands sell their products through private labeling and it’s quite possible the brand and the generic are exactly the same except for the packaging and the price. Two items sitting right next to each other on the same shelf that are exactly the same except for their label and one can sell twice as much as the other.

So why would anyone ever buy the brand name item that costs more?

My TV Has More Value Than Your TV

My first job, other than a paper route, was working in an audio/video store called Crazy Eddies. Those of you on the east coast of the United States will likely remember the store or at least the commercials. And no the guy in the commercials wasn’t Eddie. Anyway we used to sell these two knockoff brands of televisions. I think they were a knockoff of a major brand, but I can’t honestly remember after all these years. The two knockoffs were called Multi-tech and Dyna-tech. They were exactly the same in every way. Same tv, same packaging, and even the same price. The only difference was those few letters at the start of each name. One was Multi and the other Dyna. That was the only difference.

One day two customers came to the stock window to pick up their sets. They’d each bought one of the two knockoffs. While one of my coworkers was grabbing their tvs I listened to the two of them debate which of their tvs was better all the while knowing they’d purchased the same thing. I smiled to myself as they quoted features to each other and made up facts the sales person told them about the set they were taking home. And all the time each was going home with the exact same tv that they’d bought for the exact same price.

So why were they arguing with each other over who got the better tv?

The answer is that people don’t buy on price. They buy on value of more correctly their perceived value in a product of service. People by brand name foods in the supermarket, because they believe the brand is better in some way and offers a better value. Two people can argue over which of the exact same television is the better bargain because each perceives the set they are buying offers a better value.

That Bottle Of Wine Costs How Much?

Think about two bottles of wine, one selling for $20 and the other selling for $200. Both will be gone by the end of dinner so why buy the more expensive bottle? Because for some it has more value. It tastes better in some way and that extra taste is worth $180. For some no bottle of wine is worth $200 or maybe even $20. All they want from that bottle is to get drunk. A cheap bottle of wine does just as well as an expensive bottle if the intoxication you get from it is it’s only value.

For some,, while there is no discernible difference in taste between the two bottles, they may still opt for the $200 bottle of wine. Why if they don’t get any real value out of it? Real value or not they perceive that $200 bottle to have more value. Maybe they think it will impress their date or maybe they believe it does taste better even if they really can’t tell. Somehow in between paying the extra money and the last glass they convince themselves that it really did taste better. They may even just assume it’s better because of the higher price.

Price And The Perception Of Value

If I pointed you to competing services, one charging $15/hr and the other charging $350/hr, which would you assume offers the higher quality service? Clearly there’s not enough information to decide with only their rates as information, but likely you would assume the $350/hr company offers the higher quality. They may not, but the perception is that since they charge more they must be better.

Earlier in this post I claimed that competing on price isn’t the smartest decision for a small business to make. There will always be some other business that can charge less than you can. A better option is to charge what you will and offer more value for that price. Give customers the perception that your products and services are a better value than the competition and you have a good chance of selling to them. Back that up with real value to maintain that perception and you’ll create some loyal customers who buy again and again and again.

Don’t try to give your customers the best price. Give them the best value for the price.

Download a free sample from my book, Design Fundamentals.

5 comments

  1. So true about the perception and value. If it is not just perception, offer more value for the same price. If anything, raise the price. While it will certainly get rid of less determined customers, it will keep those, who value value.

    P.S. If we take us as sample SEOs, we’ll see that, while I currently cost way lower than you, our services are comparable, because I don’t have an established reputation and have a way lower costs of living. So cost is not the best way to judge SEOs (in particular) by.

  2. It’s true that just because something is more expensive doesn’t mean it’s any better. it’s odd though that many people will assume that. I have to put myself in that group sometimes too. I think it’s normal to make the assumption true or not.

    It’s interesting too that many businesses think that if they aren’t selling enough they should lower their prices. Often raising prices will lead to more sales. Sometimes people see a low priced item and think it must not have the same value as a higher priced item or it would be closer in price.

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