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Perceived Value and Benefit

© Bert Markgraf

Why does anyone buy from your small business? Because you offer something which they think has value. Why should they continue to buy from you? Because they derived a benefit from dealing with you and because they want to continue getting that benefit. First make sure that your product is seen as something valuable. Then make sure that your customers benefit from the transaction and your business will do well.

The difference between perceived and actual value is very important here. The first purchase is based on perceived value which may be quite different from the actual value of the product. It is the actual value which leads to the benefit to the customer and to the decision to continue buying from you. You decide to buy a cereal for the first time because the package says it has 23 essential nutrients - perceived value. You continue to buy the cereal because the kids like it - actual value leading to a benefit. Yet, you would probably not buy a cereal for the first time purely because the package says, "Your kids will like it," and, if you found out the cereal was not actually nutritious, you would probably stop buying it.

The reason this distinction is important for your small business is because a good perceived value strategy will grow your business while good value added leading to good benefits will keep your existing customers happy. You have to allocate your resources in these two areas depending on what you want for your business.

Once you have decided whether your business, at the moment, needs growth or consolidation, you can focus on perceived value or on the actual value and your customers' benefits. Your analysis needs to look at what your costs are for providing either. Have a look at this web page for help with such cost-benefit analyses. It defines concepts such as recurring, tangible and intangible costs and introduces factors such as effectiveness, productivity, efficiency and work patterns. Since you will be passing your additional cost on to your customers, the key is to deliver maximum value to the customer for minimum cost to your business. Even if you don't plan to do a detailed analysis, glancing through this paper will probably give you a few ideas of what to look for in terms of delivering value to your customers.