Business Transformation

Real vs. Perceived Value- What’s The Difference?

Mitche Graf

I know what you are thinking…this is just like asking the question “what came first, the chicken or the egg.” So how do you create value for your products and services? One of the simplest ways to create a higher perceived value is to under promise and over deliver every time. If you tell your customer their order will be done in 4 weeks, make sure it’s ready in 3. If you quote someone $500 for package, come in less. It’s all part of giving them that positive experience that will reap rewards for your years to come.

Value is not the same as cost. Cost is what we pay to purchase something. The value of something to our customer needs to be significantly more than the selling price or they don’t have an incentive to buy.

Let’s say you have a product in your business that sells for $1000, or should I say you want to sell for $1000… Through all your marketing efforts, advertising, promotional collateral, positioning, and image creation, you want customers to flock to your business and pay $1000 for let’s say it’s a Black-Super-Sonic-Whatsahoosit-Plus-Widget. Now, whether you are successful at selling the Black-Super-Sonic-Whatsahoosit-Widget is completely dependent on value or the “perceived value” it has to your client. Basically, 1 of 3 marketing phenomena is going to take place….

First. Your client’s perception of your widget is only $500, in which case you would have to discount by 50% to have a successful campaign. This is a popular technique before the holidays, or after the holidays for many of the chain stores. They motivate us with a very deep discount to lure us into the confines of their retail store, in the hopes you will purchase more than the item that is 50% off. Groceries stores are famous for this technique… They will run an ad for $1.49 milk, or .29 Black Olives, or ears of corn 10 for a buck… and on your way to the farthest corner of the store to pick up your gallon of milk… you pass large end cap displays with 600 rolls of paper towels, or 1000 cans of pumpkin pie filling, or cherry cordial for .99 cents…. And you can rest assured those items carry with them a nice profit margin.

The stores know intimately through their marketing research that for every 10 gallons of milk they sell at $1.49, they will also sell a fair number of other products as well. They make up for their discount on milk with sales from other high profit items. This technique is called using a “loss-leader” to attract customers in the door and can easily be adapted to a smaller business.

Second, the client’s perception of your widget is right at $1000. Not more, not less. Exactly $1000. This is strategically worked to perfection by companies like Nordstrom’s, Harley Davidson motorcycles, or Tesla electric cars. They create a demand for their products in such a way that we will gladly pay the asking price, just so we can be associated with that product. It’s more about our image and making us feel special than it is what price we pay. They have made us believe that the price really isn’t that important. We want to belong to the “club” so to speak. When you go to a Tesla dealer, the asking price is also the selling price… No dickering, no negotiating. If you want to drive a Tesla, this is the price. If you want what they sell, you pay.

Third… You manage to create a “perceived value” in the mind of the customer some point more than $1000. Maybe it’s $1200, maybe $1500, maybe $2000 or more. The greater the discrepancy between the selling price and the perceived value, the higher the level of motivation your customer will have, and the greater the level of sales you will have. This is done primarily by adding additional value to their purchase. The sky really is the limit here, and the more creative you get, the better your response will be. Remember one of the basic rules of marketing… Either you are different and unique, or you are out of business. Find out what everyone else is doing, then don’t do it. Run as fast as you can in the other direction. This is how you guarantee you will separate yourself from the rest of the pack!

I love a group called Mannheim Steamroller and their leader Chip Davis. Many of you may recognize the name, and if not, you would be familiar with their music if you heard it on the radio. Around the holidays you will see their music advertised everywhere, and chances are you may see them come to your city for a performance (they have several versions of the band that travel extensively during the last part of the year).

What they do to motivate us to purchase their music is they will send you a free BBQ sauce kit, or a large tin of gourmet hot chocolate with the purchase of one of their collections.

I am one of those people who will always look for the unique and different, and their approach to marketing is just that. With tens of millions of album sales to their credit, I’m surprised more musicians haven’t borrowed the technique! From personal experience, I can tell you the BBQ sauce goes great with chicken, and the hot chocolate is wonderful on those cold nights in front of the fire!

Another example of this technique is the infomercials on TV. They will spend the first 25 minutes of the show creating a value in our minds of $19.99…. And most of the time, we probably believe that’s what the product is worth. Then suddenly, they sweeten the pot with “if you call in the next 7 minutes, we will include a second one absolutely free!” You see it time and time again, so obviously it works, or they wouldn’t continue doing it.

If the value in the mind of the customer is greater than the asking price, BOOM…. You have a good chance of making the sale! So, the bottom line in all this is simple… Always give your customers value that is greater than the price they pay.

That’s the question of the day… How can you create a value in our products (perceived or real), that motivates people to want to do business with you? Perceived Value is strongly influenced by emotion, ego, personal image… Things that are intangible…… and should all be considered in your marketing programs.

Here’s a rule of thumb I encourage you to make part of the fabric of your business-

Don’t discount…. Give stuff away… Let me say that again…. Don’t discount… Give stuff away!

When you discount- you penalize good clients and attract the price shoppers. Instead of offering some sort of discount the attract clients into your business, and diminishing the perceived value of your products, give them something for free that adds value to their purchase, or brings some joy to their lives! And the fun part for you as a power marketer…… you can do anything you want, and make sure it’s something they can’t get from any of your competitors. That way you continue to gain ownership of your hook and category each day. Obviously, whatever you do needs to make sense financial, and only you know what your restrictions and limits are.

One thing you will find as you begin to brainstorm and come up with creative marketing programs is that you will have some good ideas, and some not so good ideas, and you must be willing to try them all.

An idea I tried about 25 years ago for one of my businesses I owned in the wedding industry sounded great at the beginning but turned out to be a lot of work in the end, and I’m sure you’ll see why after I tell you this story.

I was looking for an innovative idea that I could use to entice and motivate potential wedding clients to book with me instead of my competitors. Originally, I was going to use it for people who signed a contract at a Bridal Fair, but I ended up using it the entire year. My idea was this…… for every 1 hour of coverage you hired my photography studio for, I would provide I hour of limousine rental for free…. So, if the client had a 5 hour wedding package, they would get a nice limousine for 5 hours. Well, instead of working some sort of arrangement with a local company, I decided to just go out and purchase the entire company…. Lock, stock, and barrel!

The idea was a tremendous success……. Our booking rate went through the roof, and we became the “talk of the town”. I hired a chauffeur, arranged all the necessary insurances, and licenses, phone numbers, etc.… Our clients absolutely loved what we did for them, but I had just purchased a business, complete with a toll free number and a yellow page ad. The calls came in at 8am Sunday morning and 11 o’clock Tuesday night… Weddings, birthday parties, anniversaries, business get-togethers, sweet 16 parties. It was a real business, which meant I had to arrange coverage 24/7, for the phone and for a driver.

Many times, I ended up being the chauffeur, the mechanic, and the person who washed the limo. It did very well as a business, but it became very time consuming and took the focus away from what the original intention was, which was to provide my clients with something unique and different that would position my studio in their minds as a cut above the competition. After about 1 year, I decided to sell the company and move on to other ideas.

Regardless of the outcome of your ideas, you must be willing to risk failure to attain the highest level of success. You will not be able to discover new lands unless you risk losing sight of the shore. Be bold, be adventurous, and have some fun!

As you can see, creating value for yourself and your company takes on many different faces and comes in a vast plethora of colors. It’s all up to you and what your goals are in life. It’s very easy for us to fall into that old management trap and get caught-up in the day to day details of running our business. We end up running of our businesses instead of designing our lives We all fall prey to it, the day to day stuff- Answering phones, ordering supplies, cleaning the office. Before we know it, our free time is gone, and there is no time for the things in life that are truly important, like family and personal hobbies…

You’re working Friday nights, Sunday mornings, holidays. You don’t have time to play with our children or take a drive with our family along the lake, read that good book we’ve been meaning to get to, or practice your putting at the golf course. The things that are most important to us start slowly slipping away and we become a slave to our business rather than its master.

Whether you are the Cadillac in your market or the Volkswagen, and there is plenty of room for both, adding value, real or perceived, to your customer’s lives should be one of the most important aspects of your marketing philosophy. There is always a way to add value. Not everyone can be the Cadillac, in fact there’s only 1, and not everyone wants to buy a Cadillac. Some people want to buy a Lexus, or a minivan, or a ford escort, or a mustang…. And there’s plenty of room for all these models, and profit as well.

It’s OK to borrow other ideas from within your industry, and outside of your industry you find to be enticing to your type of business. You don’t need to reinvent the wheel… Just find an idea that already exists and customize it to meet your personality and style. Since you can’t be all things to all people, find what you are good at, and make it your trademark- your personal stamp. The day of Jack of all Trades is long gone, and the age of specialization is upon us. So whatever position or niche you want to occupy in the customer’s mind, everything you do should be with that in mind, and be consistent with your goals and objectives.

I would like to share a couple of final thoughts with you. We have the honor and the privilege to not only sell fine products and services to our customers, but to sell ourselves as well. Believing in yourself and your abilities as not only as an entrepreneur, but as a Power Marketer can bring you rewards too great to number. The challenge of creating effective marketing programs that position yourself in exactly the place you want to be, can be difficult at times, but also one of the most fulfilling and rewarding feelings you will ever have, but you must be willing to run away from the rest of the crowd. Separating yourself from the rest of the pack is never easy but can take you to places never dreamed of…. If you are willing to take the risk. Life…… is NOT a spectator sport!


Written by Mitche Graf.
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Mitche Graf
Lifestyle entrepreneur, best-selling author, serial entrepreneur, international-renowned business speaker, 2-time nationally-syndicated radio show host, and former All American Track & Field athlete Mitche Graf has been a passionate serial entrepreneur for over 35 years, dangling his toes into the ponds of many intriguing industries along the way. He spends much of his time looking for ways to work smarter, not harder, so he can spend more time doing and enjoying the things in life that are most important to him.


Mitche Graf is an opinion columnist for the CEOWORLD magazine. You can follow him on LinkedIn. For more information, visit the author’s website.