No matter how good you might think your brand is, the real truth lies within the perception of the consumer. Customer perceptions will affect the way consumers (including potential customers) think about and interact with your brand.
Customer value measures a product’s worth and compares it to other alternatives. At its simplest, it determines whether customers feel they have (or will) receive enough value for the amount they paid for a product. Understanding Customer Perceived Value (CPV) and learning to calculate and analyse it can help you price your products correctly and improve the customer experience.
At Spark, we love helping our clients uncover human truths about their customers. It’s really what gets us out of bed in the morning. Chat to one of our researchers today, or read on to find out more.
How can CPV be calculated?
Customer perceived value actually has little to do with the actual price of the product, it has more to do with intangible, abstract costs. To put it simply, it can be determined by the relationship between the perceived benefits and the perceived costs (see below).
How to calculate CPV
|Customer perceived benefit – customer perceived cost = customer perceived value|
How Potential Value is determined
When customers are making a purchase decision, there are a whole host of factors they will consider. Apart from the technical features or specifications, they will also mull over some other attributes.
This is how the customer perceives the actual physical attributes of your product. This includes things like design, texture, size and colour. Does your customer think it’s the right size? Too big or too small? Is it heavy or light? Do they like the way it looks?
This is how much personal value the customer believes they could gain from your product. For example, they will ask questions such as ‘how will this help improve my life?’ and ‘will it save me time or solve a problem I have?’.
These are the intangible benefits the customer feels they could gain from buying your product. This is how it will make them feel – will they be happier or less stressed, for example? Are Gen Zs buying Nike Air Force 1s because they are in style or because of peer pressure? Is there a difference? Ultimately, they are thinking about how they will feel emotionally if they don’t buy the product.
The different types of Customer Perceived Value
Customer perceived value consists of a number of practical and emotional aspects which make up the complete picture.
Each customer will have their own idea about how much a product is worth, and how much they are willing to pay for it.
- Tactical pricing: Customers like to feel they have got their money’s worth. This type of value is added by the amount of time or money the customer can save by using the product. For example, knowing there is potential to get two months ‘free’ could be the nudge a customer needs to take out a year’s magazine subscription, rather than buying individual issues.
- 5 for £5: When customers see a deal such as this, it often doesn’t click in their head they could buy one of the products on its own. They perceive they are getting better value for each product if they buy multiple ones as part of a deal.
- Power of 9: There is a theory in marketing that when customers read numbers from left to right, the last one they see is the one that sticks in their mind. The brain also associates the number nine with deals and discounts, so a product is more likely to be bought if prices at £9.99 rather than £10, for example.
- Removing monetary value: Research has shown that customers are less likely to make a purchase when menu options include monetary symbols, for example dollar or pound signs. Therefore, removing these can help increase sales.
- Changing units of measurement: Customers often perceive the value of a product in comparison to other things that the same amount of money can buy. For example, Elon Musk bought Twitter for $44 billion – not many of us can conceptualise how much money that is. For $44 billion you could buy 120 million years of a subscription to Pret, or 110,000 Jaguar E-types.
Customers are much more likely to buy from brands which are known for their level of high quality, as they will attach more value to the products they sell.
So, how do you increase the credibility of your brand in the eyes of your target audience?
- Trials: Trials are a fantastic way to minimise customer risk. It’s a way to show your target audience that you believe in your product. We can all be apprehensive about giving our card details and paying money for something we haven’t tried yet. This decreases the customer’s concerns as they can literally ‘try before you buy’.
- Testimonials: The last time you made a purchase online, did you read the reviews beforehand? Publishing testimonials and reviews on your website allows for increased trust as customers can see that others enjoyed the product. In the modern era, consumers are suspicious of advertisements, so real-life testimonials are a great way to get the message across about your product.
- Partnerships: Partnering with another company that has great credibility is an ideal way to boost your brand. However, they’re a number of things that need to be considered, such as their reputation, and their target audience should be similar to yours.
One way to increase CPV is to appeal to their own personal values: what is important to them and their lives? To do this, you need to find out what your target market is interested in.
- Conscious branding: In the modern age, we think more about where we are spending our money. Studies have shown that people are more likely to buy from a brand that they believe shares their values. In fact, it has also been shown that consumers are willing to pay a higher price for a similar product if it’s to support a good cause.
- Locality: Customers want to support their own communities. Buying from a local company which sources its materials or ingredients from the surrounding area is not only good for the planet, but good for perceived value. This is a small way in which a customer can feel they are having a positive impact on their community.
The Value of Time
As humans, we perceive the value of time more than the value of money. When it comes to marketing, we need to consider that customers want their buying journey to be free of time restraints. It’s twofold however, as time also sells.
- Convenience: Customers are much more likely to complete a purchase if they believe the product will make their time more efficient. The buying experience also needs to be smooth and efficient, with a simple checkout process that allows each customer to fill their details in quickly and easily.
How can we measure customer perceptions?
- Collect customer feedback: custom surveys, questionnaires
Going straight to the horse’s mouth is a great way to find out what customers think of your products and your brand. These can be done online, over the phone or even through the post.
- Look at psychographic data
Psychographic data refers to information about people’s attitudes, beliefs, interests and personalities. Collecting this data can help you understand how your consumers view the world, and what triggers them to make a purchase. This can be done through psychographic surveys and is helpful in unpicking what different customer demographics think about your business.
- Follow up with customers
Reviews are an excellent way to understand any issues customers have with your product or buying process, and help you alleviate any pain points. You can reach out to customers who have left reviews to further comprehend their issues and work to resolve them for others in the future.
- Customer sentiment analysis
Sentiment analysis is a great way to gauge how consumers are feeling about your brand and product. It’s a fantastic tool that can mine data to decode emotions, whether people are speaking about your brand positively or negatively. Analysing the mood of your consumers also allows you to adapt to their mood and drive the conversation accordingly, meaning you will provide a more empathetic service for your customers.
- Brand tracking
Customers talk about and engage with brands all the time, either directly or indirectly. Tracking these interactions allows you the opportunity to understand their behaviours, and can adapt accordingly.
How to raise customer perceived value
So, you’ve been measuring and gathering all the information about how customers perceive your product or products, but how do you raise their perception value?
- Analyse the customer experience
How easy is it for a customer to make a purchase on your site? Analyse the journey from start to finish and identify any pain points that come up during the process. You want your customers to be able to purchase your product effortlessly and have a positive experience on your website.
- Create value
Although price is important, you need to think about more than just that. Customer needs from a product vary between performance, appearance and many other factors.
- Offer incentives
Just because someone is already loyal to your business, doesn’t mean they can’t have more value from your product. Additional benefits such as customer loyalty programmes can enhance the value for these customers, while providing you with invaluable customer data.
The importance of Customer Perceived Value
Analysing and measuring customer perceived value should be a vital part of your overall marketing strategy. After all, marketing professionals can use it to predict or improve how consumers view a product. As this increases, so do sales and profits. A win-win for any brand!
At Spark, we have a fantastic balance of research specialisms and expertise, having worked in all sorts of industries from finance to retail and health and wellbeing.
Get in touch today to chat to one of our Sparkies to find out how we can help.