what is the perception of value?
Insights from Base Camp
Value is always in the eyes of the beholder. Extensive research has gone into trying to discover the psychology and science behind perceived value. Understanding the science is an important tool for developing strategic and competitive pricing because it helps to identify the key behind walking the fine line between charging too much or too little.
Overvalue
Overvalue can create some great things, including a perception of exclusivity. What better than a waitlist to work with you? Shouldn’t that say it all?
However, at the same time, overvalue can narrow services, restrict offerings, and ultimately single out clients, or narrow your target. (Pros and cons to that one)
Overvalue can also create negative impacts and perception by simply being seen as “just too expensive.” If you aren’t assessing your value properly, and simply saying “I just know I’m worth it,” you could be pricing your ideal client right out of your business.
- Pro: Create consumer perception of exclusivity.
- Con: Risk shutting out prospects or clients if value isn’t targeted and balanced.
Undervalue
Undervalue is often the “just sell” approach. This is where research has found that competitors who are priced the same, want to be perceived as being priced lower than they actually are. But why?
Value is too close to that of a competitor, and at the same time, margins are so thin that being overvalued is not a viable option. Thus, putting businesses in a fight to capture the “sale” by simply being seen as “cheaper” in order to protect themselves from losing prospects and/or current customers to their competition.
While this perception can prove to have some positive impact, including capabilities of servicing a broader audience, it can also have negative outcomes for things such as cost-to-do-business and internal culture.
- Pro: Capture more of a general market by meeting or pricing out competitors.
- Con: Struggle to transform or manage value perception without overspending.
True Value
The ultimate value perception should be tailored, and your true value comes down to knowing your target customer (prospect and client), and understanding your perceived value to each. The key here is remembering the customer’s perceived value, not yours.
This strategy can be managed through a defined service matrix that has taken into consideration client segment, what services they receive, and the cost of the time it takes to serve those clients.
Additionally, feedback through direct conversation, surveys or client advisory boards, combined with reflective data through key insights from programs such as CRM can help measure value perception. Without this information, no strategy will prove to be successful.
- Pro: Create a balance that is conducive of enhancing the customer experience.
- Con: Time intensive as building a strategy behind value comes down to assessing cost of time and cost to serve.
