Growing Small Businesses

Lesson 2: Positioning your product or service

Perceived value

Once you've got your added value straight and what you offer properly positioned with regard to your target markets, you're starting to really understand why your customers are buying from you rather than from someone else. But now you run into a problem. You're doing all this wonderful work adding valuable features but, when you talk with your customers, they don't even seem to know about some of them. Instead, you're getting orders from people who don't fit the profile and they're raving about product features you didn't even know you had. What you're finding is that there is a gap between what your doing with your product and how your customers perceive your product. When customers perceive a value and get a benefit which you didn't specifically build into your product, then that's perceived value.

Perceived value has a bit of a bad name because marketing people have figured out that, if it's perceived value and doesn't have to be built into the product, they can make it up. If there is no actual benefit to the customer afterwards, well hey, he just perceived wrong. So you have all kinds of marketing campaigns telling consumers that, if they buy this product, they will feel younger, better, have more friends etc. These campaigns work temporarily but are counterproductive in the long term as your customers become cynical about your claims for your product. For small businesses who are customer-oriented and are seeking to build long term relationships, this approach doesn't work.

While made-up perceived value is a bad strategy for small business, perceived value itself is a strong tool for getting and keeping customers. The key is that there has to be a benefit corresponding to the perceived value and that's tricky.

If we go back to our computer supplier example we can look at several examples.

• If your target market is retirees and you give them a bigger screen so they can read their e-mail without their reading glasses, that costs you money, it's real added value, you can charge for it and the customer has a real benefit from a real added value.
• If you put your computer into a cute casing so that it's fun to work on, the additional cost is negligible, the added value is perceived but the customer has a real benefit. Having fun working on a cute computer is a real benefit derived from perceived value and you can charge for that.
• If you offer your standard computer but call it user-friendly, it doesn't cost you any money and the added value is perceived but the customer has no benefit. When he realizes that his computer is no more user-friendly than anyone else's, he won't buy from you again. You will have sold a computer but lost the opportunity for gaining a long-term customer.

Even if you don't pursue a perceived value strategy for your business, you have to be aware that everything you do contributes to your reputation and the image of your company in the marketplace. If your image and reputation are good, your products will be perceived in a positive light and they will have extra value in the eyes of your customers. The benefit is there as well because your customers will feel that they are doing business with a good, reliable company and they like that. The opposite is true if your business doesn't have a good image or reputation.

Many small business owners are not comfortable consciously using perceived value in their business strategy. They tend to be realists offering concrete benefits for real added value. But perceived value is a factor for your customers in their buying decisions and, if the members of your target group are not responding as expected to your added value strategies, you can bet there's a perceived value element in there somewhere and you had better know about it, find out how it's working and use it if you can.

  1  2  3  4  5  6