Last night I paid $15 for a beer. Today I bought the same brand of beer for a dollar. In both cases I left with the feeling that I received fair value for my money. In fact, I actually felt better about buying the more expensive beer.
I had the $15 dollar beer in an exclusive sky bar. It was presented in a tall glass, accompanied by a small bowl of mixed nuts and was served by a beautiful woman in an elegant dress. I bought the dollar beer in a plastic cup from a street vendor wearing a stained T-shirt. While the beer was the same, my perception of value was different. How your customer perceives your store can influence their willingness to buy from you and how much they will spend.
Price
Price, while a strong motivator, only plays a small part in a consumer’s decision to buy. What counts more is your customer’s perception of value. One tactic is to be known for having the lowest price in your market. Wal-Mart became the world’s largest retailer by giving the perception that nobody can beat their price. Other merchants may offer the same item at the same price but you’ll see their customers use smartphones to scan barcodes to compare prices with other merchants. Because of the perceived best price value, Wal-Mart customers rarely seek out price comparisons.
On the other side of pricing strategy, Tiffany can easily sell a silver pendant for $200 while an independent retailer may have trouble selling a similar item of the same quality for $50. Consumers perceive that Tiffany has a higher quality and is therefore a safer buy. Tiffany reinforces that perception with an up-scale location, elegant displays, over-the-top customer service, and their famous robin’s-egg blue packaging.
Product density
In the grocery business there is an old adage: Pile ‘em high, watch them buy. The perception is that volume buying can provide a better value. This strategy is common in the Caribbean jewellery market. Cases are stuffed with product. 200 pairs of studs in one display are a common sight Customers will compare prices with local and online stores to see if they are getting a good deal. This concept works well but the store trades margin for volume.
In contrast, a store window containing only one pair of diamond studs gives the impression that they must be something very special and desirable. This focuses on the exclusiveness of a luxury item. Even if they are identical to the product in the high density case, the customer gets the perception of superior quality and expects to pay a high price for such an amazing pair of diamonds.
Customer experience
Surprisingly, even very price-conscious consumers are willing to spend more for an item if they can perceive an additional value. A well dressed, friendly, and knowledgeable salesperson implies confidence and trust. An elegant ambiance adds to the impression of luxury. An offer of life-time of free cleaning, polishing and sizing makes the customer feel safe and cared for. Even if the “bargain” seller offers the same services with the lower priced product, it is the perception of value that justifies a higher price.
Whose perception counts?
Try to see your store from the viewpoint of your customer. It helps to ask some of your better customers what they think. Do they see you as the best bargain or the finest quality? Follow your customer’s lead. After all, their perception is the one that helps them decide whether to purchase from you or from your competition. That is the true value of perception.