What is it about that blue box – the iconic Tiffany’s box.
What’s inside isn’t, typically, very exciting in purely objective terms. A relatively plain diamond engagement ring (okay, the engagement itself is exciting), a charm bracelet, heart necklace or pair of generic earrings the like of which you could easily find at Zales? Half the magic of Tiffany’s is knowing it came from Tiffany’s – the iconic mecca for diamond and Audrey Hepburn fans. There’s romance in that box that is only tangentially related to the jewelry.
There’s also social cachet.
I don’t mean to sound jaded. I wouldn’t turn a down a blue box or its contents. But I do want to point out that its value isn’t intrinsic: it’s perceptual.
Perception is a very individual thing, influenced by life experience, personality, past interactions with your brand and your competitors (and with certain classic movies). Perception is the voice that whispers “Yes, you should buy the Poinsettia Flower Pot Cake for $165 because Oprah said so,” or “Hey, maybe I’ll give AirBnB a chance – Kim looks really comfy.”
Perception is so subtle, many of us don’t pay it much attention. But marketers do. CROs do. And you should, too.
Even the words you use in your value proposition, marketing, and product pages will mean slightly different things to different people. The words quality, premium, economy, value, guarantee might mean “an intelligent purchase decision” to some buyers, or just mean “cheap” to others.
It’s because perception is so varied, and I would argue malleable, that it can be influenced to generate higher conversions – without increasing your own costs.
And you don’t need Oprah or Kim to do it.
Hey now – this isn’t entirely self-serving. Customers want to feel good about their purchases, that they’ve made the best possible decision on a product that meets their practical and emotional needs. And, when they do feel that way, they tend to be more loyal. Everybody wins.
How Perceived Value Works
“Real” value is very specific and non-negotiable: It’s the relationship between the actual manufacturing cost and the price the product is sold for.
“Perceived” value is what consumers think the product is worth to them.
For example, the 2013 Aston Martin Cygnet was made by Toyota – a near copy of the Scion iQ – but branded Aston Martin, retailed for more than $45,000. The Toyota Scion iQ retailed for just $17,000. This specific switcheroo didn’t fly with consumers (Aston Martin stopped making the Cygnet shortly therafter), but many more do.
It’s common practice in the car industry, called “badge engineering:” taking the same model car, and often the same makers in the same factories, and selling it under a different brand with minor cosmetic changes.
“Rebadged cars are identical in all respects, except perhaps for some tiny cosmetic distinctions such as the placing of the headlamps or the shape of the trunk. They not only come from the same factories but are in many cases made by the same workers on the same production lines. Yet their prices can vary significantly depending on which maker’s badge is on the grill.” – Forbes
Essentially, the cars are priced based on their perceived value (their actual value is about the same). And it works more often than not.
Sound crooked? Well, that depends (once again) on your perspective.
In the TED Talk Life Lessons from an Ad Man, Rory Sutherland builds a case for perceived value being just as satisfying as what we consider “real” value. In fact, many luxury goods are based on perception rather than actual cost to produce, and studies even support the idea that we get more pleasure from higher-priced goods, based on price alone.
“Researchers at Stanford GSB and the California Institute of Technology found that if a person is told they are tasting two different wines — one costs $5 and the other $45 (but they’re actually the same wine) — the part of the brain that experiences pleasure will become more active when the drinker thinks they are having the expensive wine.” (Freakonomics radio & ConversionXL)
Clearly, the intangible importance we place on things does have value.
The question becomes, how can you add intangible value to your products when you’re not Tiffany, Aston Martin, or Mouton Rothschild?
Leveraging the Power of Perception
The object of the game is to increase the intangible/perceived value of your product without actually doing anything substantial to the product itself.
The key to winning this game lies in the definition of perceived value itself:
“A customer’s opinion of a product’s value to him or her. It may have little or nothing to do with the product’s market price, and depends on the product’s ability to satisfy his or her needs or requirements.”
It depends on the product’s ability to satisfy his or her needs – and those needs are, quite often, more emotional than practical.
If the Power is in Perception – How do we Alter Perception?
In the 2010 book Money Makers: Inside the New World of Finance and Business by David Snider and Dr. Chris Howard, they simplify the question like this: When the benefits outweigh perceived costs, your prospect will take action. Customers’ perceptions of how much value there is in your value proposition, compared with the costs, will make or break your sale. And, of course, those benefits aren’t just tangible, they’re emotional as well.
Perceived value is linked to costs and benefits. Decrease the costs, increase the perceived benefits, and you’ve got it.
Method 1: Decrease Perceived Costs
When people perceive value to be greater than the price, they tend to buy (who doesn’t love getting a deal?). Which means, you have two options: Lower the price of the product so it’s below your customer’s perceived value, or raise their perception of that value.
Essentially, you can put the product on sale, or you can alter perception. The first is easy; the second requires finesse.
People make assumptions about value. They assume, for example, that higher priced items are of better quality. They assume that larger packages contain greater value. They assume that Oprah Winfrey and Kim Kardashian only promote the very best. You can use these assumptions to present your product in a way that increases its perceived value. Don’t have Oprah and Kim on-hand? You can get some of those “social proof” points by adding customer testimonials to your website and product pages.
Another technique to decrease perceived costs is called “cost re-framing.”
Cost re-framing works like this: When people are told the price in a smaller unit, their routine thought process is disrupted, and the price seems like more of a bargain than it actually is. In the study, the researchers went door to door selling note cards for charity. In the first pitch, they sold it as “$3 for 8 cards.” That worked 40% of the time. Their second pitch was “300 pennies for 8 cards,” which worked 80% of the time.
Another example we’ve all seen runs something like this: “For the cost of just one coffee a day, you can save a child.” That sounds much more doable than asking people to give $1277 a year as a charitable donation (which is the cost of my favorite local latte, if I were to indulge daily).
Car dealerships do this every day with lease deals, “Just $199 per month!” (for the next ten years).
Method 2: Increase Perceived Benefits
Here’s one way to increase perceived benefits:
I don’t think this ad would work on someone in the market to buy a Lamborghini (very different customer profile!), but it would work on someone trying to talk themselves into the dowdier, more practical van.
But what if your challenge is to differentiate your product from a very similar one? You can increase your perceived value by doing something your competitor doesn’t – letting customers “peek behind the curtain” to see how your product is made (and how much care and attention is put into its design and construction). Check out this video Hyundai produced specifically to differentiate its Elantra from the Honda Civic.
Method 1 & 2: Combine Cost Reframing with Perceived Value
In copywriting especially – all of the words in your marketing and website – you can combine the cost re-frame with the perceived-benefits-boost. We see this all the time.
“Expensive” becomes “Exclusive”
“Cheap” becomes “Great Value!”
“Lemons” become “Deconstructed Limoncello: Just Add Vodka”
You get the idea.
Another example of how you could combine a re-frame with added value is the ‘ending-in-9’ phenomena. Ever wonder why every deal offered on television is Something.99? Researchers at MIT and the University of Chicago found that prices ending in 9 increase customer demand for product. People (at least in the West) read from left to right, and are biased towards the first number they see – so by the time they reach the .99, their perception is that the value is closer to the first number which, in a convoluted say, makes them feel like they’re getting a better deal.
Method 3: Introduce scarcity
Did you know that diamonds aren’t really scarce? There’s actually no real reason for their expense – except for the perceived value placed on it by De Beers’ iconic slogan “A diamond is forever.” They made the diamond into a symbol of successful marriage, and who wouldn’t pay for that?
The difference between a reasonably priced rock and 3-month’s salary really is De Beers.
But it wasn’t just great marketing that drove up the price of diamonds – De Beers also carefully restricts the supply of diamonds, artificially creating scarcity. And scarcity deeply affects perceived value.
Scarcity enhances perceptions of expensiveness and desirability, and it’s also one of Cialdini’s 6 Principles of Influence. No matter what the price, people are more likely to purchase the very last available product, or jump on the soon-to-expire deal. Call it “scarcity” or call it FOMO (Fear of Missing Out) – it works.
Method 4: Altruism as Added Value
Feeling good about doing good is a core human trait, and that ‘feeling good’ has real monetary value, if you can leverage it. AmazonSmile promises to donate .5% of a shopper’s total purchase towards their designated nonprofit – which is brilliant/diabolical cost re-framing (it’s a whopping $5 out of every $1000, to put it in perspective). And, the non-profit organization needs to accumulate at least $5 worth of donations in a given quarter for a check to be cut – no easy task.
Few people really understand how AmazonSmile works – but it sounds like such a lovely idea. Shop like you would anyway, and your favorite nonprofit benefits! It’s priceless advertising, it’s an added incentive to shop at Amazon, it makes consumers feel good, and you can bet it boosts conversion rates (Amazon has not been forthcoming with its Smile stats).
I would strongly suggest not going the AmazonSmile route of taking advantage of peoples’ better natures. On the world-wide web truth always comes out. But, you can still institute a more conscientious charitable program in your e-commerce store that delivers positive results to everyone involved, and promote it as your new differentiator.
Giving a percentage to charity is the quick-and-easy route to appealing to philanthropic consumers. But an increasing number of companies are reinventing the way they do business to source sustainably and support the communities that make their products. These companies, like People Tree in the UK or Theo Chocolate in Seattle, charge a premium for their products, which people are genuinely happy to pay.
Method 5: “Valued at”
One of the simplest methods of increasing your perceived value is by just saying what it’s “valued at.” Who does this valuing?! Nobody knows. But just by placing the higher number next to your product that you’re selling for less, you’re building a perception in the consumer of getting more for his or her money.
Got a promotional giveaway, like Neil Patel’s Free Course? His is “Valued at $300.”
It’s simple, but it’s not necessarily easy. You can’t assume people are stupid – you have to provide real reasons for your self-evaluation (or it won’t ring true). Neil Patel can say his course is valued at $300 because he’s established himself as an expert in his field. Building brand recognition and a reputation for expertise, as well as accumulating testimonials, can all help legitimize your “Valued at” claims.
Method 6: Just Make Your Typeface Smaller
Saving the easiest and laziest for last, this actually works. According to marketing professors at Clark University and the University of Connecticut, consumers perceive a price to be a better value when the numbers are written in a small font.
Or, you know, you could just make your boxes blue.