The value of the products plays a vital role in the marketability of that product. What kind of value is put on that product by your target audience? Do they think it is worth its price? Do they want to buy it based on the actual value or its perceived value? What do their peers think about the product or service?
You have likely come across products and services that are more expensive than their actual value. For example, a luxury clothing brand is selling a shirt for $1,000 as opposed to another brand that sells almost the exact shirt for only $50. The difference is astounding. Aside from a few misses from the $50 shirt, there’s not much difference between the two shirts. So what makes the other one sellable at $1,000 while the other is being haggled down to $30 or $20 in the flea market?
The perceived value of a product is very different from its actual value, though it is also not impossible that they are the same (but this happens rarely). It is important to understand the difference between these two because that will affect how customers look at the product that they are buying. Whether they are ready to pay more for a certain product depends on how they perceive that product.
This value reflects the actual cost it took to produce the product. Of course, that also includes the profit that must be made from the product. For example, when a product is being priced, the seller will think of its production cost, including the labor fees. The seller will add to that cost to turn in a profit. The actual value is representative of how much the product actually costs, plus a bit of profit.
It is easy enough to determine the actual value of a product when you are familiar with it. A piece of paper must not be sold higher than a few cents, as well as a ball pen, of course. But what happens when you have zero ideas about how much it costs to produce the product? What happens then? Do you know how much a mini golf cart cost? If you don’t know, how sure are you that you’re buying it at actual value and not perceived value?
Speaking of perceived value, this is very different from the true value of the product. The perceived value came from the customer’s perception of the product or service. It is what the customer believes the product is worth. How can the perception improve? It is based on the opinions of the market and on the benefits that the customers expect to receive when they buy the said product or service.
Products with a higher perceived value tend to be sold for far more than their actual worth. You know the deal. If the product has a popular and expensive brand name, it will cost thousands of dollars when in reality, it only took a few hundreds’ dollars to make it. The good perception that the customers place on the product or service is what ups its worth. It is not the quality per se of the product, but it is the value attached to it by the customers.
The brand plays a pivotal role in the actual or perceived value of the product. Buying unbranded products means that the customers will want to pay only for a certain amount. On the other hand, buying a brand name will most likely push the customers to pay for more than the product’s actual value. Is that so wrong?
Look at your smartphone: how much do you think it is actually worth? If you are, for example, holding a certain smartphone from a company named after a fruit, do you think its actual value is more than the phones produced by other brands? If not, then why do you pay for it a hundred times over the other brands? It’s because you’ve already attached the value to it based on market perception and on feedback from your peers. If your peers say it is the best smartphone, then it is for your certain group.
Understanding the difference between these two will play a huge role in determining the right way to market your products. Do you want more people to afford your product and thus, sell it for its actual value? Or, do you want to make more profit from it? If it’s the latter, you have to improve its perceived value and target your market well.