Creating, promising and delivering value is a marketing imperative. Every brand should aim to be the best value for its customers and prospective customers. One of the most dangerous elements of modern marketing is the definition of value as merely low price. Somewhere along the way, being a “good-value” brand became synonymous with being the lowest price brand. Value is not merely about low price. Value and low price are not the same. Value is at the center of every purchase decision customers make. A customer considers many aspects when assessing a brand’s worth, they do not just think about price.
Brands that offer price deals assume the customer perceived value is the price. This is wrong. Even deal-seeking customers know they are buying on price alone; they simply do not care. Price deals erode customer trust in a brand. Customers assume that the brand is selling only on price rather than on the brand experience. Continuous deals erode customer-perceived belief in the overall worth of the brand.
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A customer’s value equation is their mental perception of the worth of the brand. The value equation considers what the costs are relative to the experience received. Mercedes is excellent value to the purchaser of a Mercedes, while the purchaser of a Prius considers that brand to be the best value.
The cost of the promised brand experience is the denominator of the perceived value equation, whereas the brand experience is the numerator of the equation. This worth-assessment reasoning kicks in each time a customer makes a purchase. Value is in the mind of the customer.
Customer-perceived value is a significant driver of brand loyalty. Research indicates that customer-perceived value is a better indicator of brand loyalty than satisfaction. This makes sense. I can be satisfied with the automobile brand that I own. But, satisfaction is not enough. I am considering buying a new car. I expect to be satisfied buying the same brand. However, I see that they significantly increased the price. So, though I expect to be satisfied with the ownership experience, I no longer think the brand is the best value. Or, think about the satisfaction survey you are asked to fill out after an auto service: you may have brought your car in for a frequently occurring problem. The service was great. But you are so disappointed in the vehicle that you will never buy that brand again. You gave a “10” for service satisfaction. If asked about repurchase, you would have provided a “1”.
Most companies use some satisfaction metric as a way to understand their brand’s/brands’ loyalty. However, customer-perceived value is a much better loyalty gauge. Companies and brands must not only change their mind-set, but their metric.
To understand why this is so, let’s look at the marketing understanding of customer-perceived value. Over time, customer-perceived value has evolved. In its simplest form, it was simply defined as what you get for what you pay, i.e., features and functions delivered for a sum of money. As life became more complex and harried, marketers recognized that time and effort are costs as well. Think about the granola bar aisle in the supermarket. There are varieties based on protein, ingredients, fat content, calories, organic, gluten-free, crunchy, soft, chewy, featuring chocolate, nuts, coconut, oatmeal, dried fruit and more. Then, there are different sizes, different brands, and different reasons to eat the bar: energy, endurance, weight control, and so forth. I could have all the time in the world, and it is still a colossal effort to figure out which granola bar is right for me. Is it worth it?
And now, in our technological, digital environment, social benefits are also part of the equation. Social benefits deliver respect, status, recognition, connectivity, membership, and define how others perceive me. Current evidence indicates that the combined functional, emotional, self-expressive, and social benefits of the customer-perceived value equation directly and positively affect brand loyalty.
The complete customer-perceived value equation is what you get (functional, emotional, self-expressive, and social benefits) for what you pay (the costs to the customer in terms of money, time, and effort). This creates brand value.
In working with different companies and brands, we learn that there is yet another important component affecting how customers perceived branded products and services: that component is trust. Trustworthy means that a customer believes in the predictability of the branded experience. Being trustworthy means delivering on promises. Being trustworthy means that a company and brand behaves with integrity.
When consumers take mental assessments of a brand’s worth, trust acts as a multiplier in the decision-making process. If trust in the brand promise is high, the perceived brand value is increased. If trust is low, the perceived brand value will be low. If there is no trust, it does not matter what the benefits or the costs are; if trust is zero, the value is zero. Without trust, brands have little value. This is the new value equation: what you get (expected experience) for the costs you pay multiplied by trust. This is the Trustworthy Brand Value Equation.
Building Trustworthy Brand Value needs to be embedded within the organization and its brands. There cannot be brand loyalty without Trustworthy Brand Value. There are buckets of data to show that although satisfaction influences purchase intention, it does not directly affect repurchase behaviors, whereas customer-perceived value positively influences brand loyalty.
Does the customer perceive that the brand’s value is trustworthy? What is the Trustworthy Brand Value for your offer? Value is not decided in a conference room. Marketers do not determine value. Marketers determine price. Marketers determine benefits. But, marketers do not determine value. Customers do. Instead of deciding what to charge based on costs, companies should determine if the asking price would be a customer-perceived trustworthy value. The marketing aim is to be perceived as the best value at the offered price point.
Building brand value is an ongoing challenge. Standing still is brand value extraction. Living off the inherited momentum of a brand’s past success is brand suicide. To increase shareholder and stakeholder value, a brand must be the most efficient and productive provider of a branded offer that customers value. Creating Trustworthy Brand Value for customers can generate brand loyalty.
For real loyalty, trust is a must. Customer-perceived Trustworthy Brand Value is essential because without trust, there is no perceived value. Customer-perceived Trustworthy Brand Value is a superior alternative for building brand consideration, preference, and loyalty. And, this leads to enduring profitable growth based on attracting more customers who will purchase more frequently, become more loyal, leading to more revenues and profit.
Contributed to Branding Strategy Insider by: Joan Kiddon, Partner, The Blake Project, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I
At The Blake Project, we help clients worldwide, in all stages of development, create meaningful differences that increase value and underpin competitive advantage. Please email us to learn how we can help you compete differently.
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