It’s all about the perceived value

One thing that counts a lot for any product is its perceived value. Customers do not buy the product, they pay for the value that the product provides them. The more the perceived value of the product, less relevant is the price tag on it and vice versa. The concept of perceived value reconfirms the importance of de-commoditization. Commodity by definition is something that has low perceived value. So the best way to remove the commodity tag from a product is by focusing on what value the product provides to its customer and adding a differentiating factor to it to make your offering stand above the competition.

If a product can create high perceived value, it can earn premium. This is something that makes an iPod nano worth $200, makes a customer pay thousands extra to buy a BMW rather than some other mid-size car, and makes a bottle of Fiji water cost 200% more than a Dasani’s.

It is interesting to look at the perceived value of Internet products. How valuable is your email service for you? How much do you value a good search engine? How much value does a good social networking site provides you? I believe a lot. But still you pay nothing for it. The entire concept of high perceived value seems to fall apart on the Internet…well not really. The concept does hold true in the Internet world as much as it does anywhere else.

In case of services like email, social networking and information look-up, the customer goes for the service that provides the most value. In fact the perceived value is the only thing that counts here, because price is totally out of the equation. What is important here is to understand the perceived value of the service for the payer, i.e. the advertiser. The value for an advertiser is directly proportional to the value for the end customer. More customers go to the service that provides more value. This in-turn attracts more advertisers to it…generating more advertising revenue for the service…making it all about the perceived value.

One response to “It’s all about the perceived value

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