Have you ever had a customer pass on your business by telling you they’d need to find a better price – or maybe even give it a go themselves? Today we're going to talk about how to use customer perceived value to increase sales.
When customers think they can replicate what you do, or compare your costs unfavourably against others, it’s normal to feel some pressure to offer a lower price. But the problem may not be your pricing. The biggest obstacle to achieving sales isn’t price. It’s customer perceived value.
Before we explore how to increase sales through customer perceived value, let’s look at how it works.
What is customer perceived value?
Customer perceived value is marketing speak for how much you are willing to pay for something compared to other options available. Now the clue is in the name but customer perceived value is highly subjective. It all comes down to a customer’s perception. Is this (product or service) worth it to me?
3 things that will always undermine customer perceived value
What are the most common ways we underestimate the value of a product or service?
- When we underestimate the difficulty of a task
- When we underestimate how long things take – both initially and for ongoing maintenance
- When we undervalue experience and connections
We love explainer videos. Digital content is a generous way to share knowledge and build rapport with your customers. However, it’s easy to see how customers might dismiss the value of an acquired skill, underestimate how long things take or not see the value of experience and connections when there’s a how-to video for just about everything. Of course everything looks easy when it’s done well. The key is not to fight it the tide. You’ll do more good for your customer perceived value by sharing your skills and expertise than disguising them. More on this later.
When cost becomes a factor
If you’ve ever offered a freebie as part of lead generation strategy, you’ll be familiar with this problem.
Client A was offering free lunchtime training sessions to their database. Registrations were high but attendance was low. There was no incentive to show up when the workshop didn’t cost anything. Client B decided to charge a small amount for the training. Fewer people registered, but those who did were far more likely to attend and do something with the information.
The bottom line is people value what they pay for. If you offer something for free, or bend to pressure to offer discounts, over time the value of your product or service may erode to a level it can be hard to come back from. The number one rule is never discount.
How to improve your customer perceived value
How can you help customers understand the time, skills and expertise required to do your job? And value them enough to buy from you?
Instead of lowering your price (and ultimately your value) we say throw the doors wide open. Teach your customers how to do your job. Show them behind the scenes. Share timely advice and insider tips, like this list of essential business marketing ideas for 2020. This works in two ways:
By revealing your ‘trade secrets’, you will build trust with potential customers. When people trust you, they want to work with you.
By sharing your knowledge, you will display your expertise. When people experience how difficult or time consuming a task is (either by observing you or trying it out for themselves after watching you), it will raise the value of what you do.
Focus on value not price
Some people will always think they can do a better job than you or try to haggle on price. When this happens, ask some questions and see if you can offer something else that will suit their budget and scope. If it doesn’t work out, don’t worry.
Instead, focus on increasing your perceived value with people who are more likely to lead to sales and long term relationships. When you know how to increase sales through customer perceived value, you’ll be less tempted to lower your price.
Like this? You may enjoy this article on how to use marketing psychology to influence buyer behaviour