What is Perceived Value
Perceived value is the worth or merits a customer ascribes to a product or service. Usually, customers are unaware of the factors involved in pricing a product or service, such as the actual or estimated costs of production. Customers rely on the emotional appeal of the product or service and their evaluation of the benefits they believe they will receive.
BREAKING DOWN Perceived Value
A consumer's perceived value translates to the price they are willing to pay for a good or service. Customers place value based on the product’s analytical ability to fulfill a need and provide satisfaction. The work of the marketing professionals is to shape and increase a consumer's perceived value for the goods and services they are selling.
Perceived Utility Value
Utility refers to the benefits and values a consumer receives from the use of a product. Consumers demand products and services that are useful and offer the benefits not satisfied by other available products. Although many products and services provide similar benefits, their perceived utility varies among consumers. High utility translates into increased demand and higher prices. There are five types of utilities that companies create through marketing campaigns to entice consumers.
- Form utility refers to when the physical design or form of a product appeals to the consumer or delivers an aesthetic value. An example of form utility would be in hiring the services of an interior decorator to furnish a room. The designer provides artistic beauty through a considered plan of furnishings.
- Task utility refers to when performance, usually through delivered services, provides value to a customer. Here an example can be seen in a customer receiving car detailing.
- Time utility refers to value from the availability of a service or product such as a 24-hour pharmacy versus a 9-5 pharmacy.
- Place utility applies to value from the convenience of the location like a neighborhood grocery versus one 30 miles away.
- Possession utility refers to the ease of acquiring a product. Examples are stores that feature online shopping with secure and straightforward ordering capabilities.
Perceived Value of Brand and Luxury Goods
A company's brand communicates a set of expectations associated with its products and services. A well-established brand commands higher prices than its generic equivalents. With the use of marketing strategies, brand image, which is the driving force of brand equity, is established. The value of the product equates to how well the brand meets the consumer's expectations. For example, expectations may include higher quality, increased utility, ease of access, and an enhanced consumer image.
A luxury good is one whose demand increases as consumer incomes increase. Naturally, people with more substantial incomes devote more of their income to purchasing luxury goods and services, which are relatively expensive to obtain. Luxury goods and services make the lives of consumers more enjoyable and enhance their status and prestige. The highest value is with owning or consuming them, not in their functionality. For example, the value in owning a standard non-luxury watch is based on its functionality. The value of owning a Rolex watch is not based solely on its functionality but is connected with the level of prestige that owning and wearing it brings.