Perceived value is a customer's personal assessment of a product's benefits and value. This value could be anything from monetary savings, to health benefits or social status. Businesses use various different tactics to convince customers that their product has additional value. This is usually to differentiate the product from competitors.
Perceived value, also referred to as customer-perceived value, is an essential factor all businesses consider when marketing their products. Perceived value is the driving force behind consumer purchases. It's what encourages customers to buy a product to meet their own specific needs and desires. A product may be excellent in the eyes of its designers, but it won’t sell if it doesn’t have sufficient value in the eyes of consumers.
Perceived value can be broadly split into a few key categories. Each one represents a different way a product may fulfil consumers’ wants and needs.
Customers see monetary value in a product when its cost is outweighed by its other benefits. Put simply, a product may not hold much functional or social value, but customers will still buy it if it’s cheap enough. Many businesses use promotions, like discounts and coupons, to increase the monetary value of their products.
Functional value is a product’s ability to resolve a specific problem, i.e. its primary function. For example, a reliable, well-built car with high fuel efficiency has high functional value for people who need a car that functions primarily as a means of transportation.
Social value is a product’s ability to increase the customer’s social standing. This may be as an object of prestige, or as something that allows customers to connect with others more easily. For example, a high-end smartphone has high social value because it’s a prestige item that allows customers to become part of a more exclusive social group.
Psychological value refers to a product’s ability to influence the customer’s emotions. This may be making the customer feel more confident, happier or even allowing them to express themselves better. Psychological value can be hard to pinpoint, but it plays an important role in many purchases.
Perceived value plays a big role in marketing. Brands differentiate their products and marketing campaigns to increase the value of their products in the eyes of their customers. This may be in relation to any of the four overarching types of value mentioned above.
When brands alter their products in an attempt to change their perceived value, they create ‘utility’. There are five different types of utility that brands aim to develop in their products:
Market and audience research is important for brands looking to increase the value of their products for specific customer groups. Not all customers will respond to the same utility offerings.
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