“Who Even Pays $100 for a T-Shirt?” A Look into Customer Perceived Value
Have you ever come across a t-shirt that costs $100 and thought to yourself: “Pfft, what a rip-off! Who would even buy that?” I sure have. But to answer the question: “Who would even buy that?”—a lot of people, and let’s talk about why.
In 2020, Gucci put ripped tights on the market for $190, and believe it or not—they sold out.
This is basically how my $5 tights look after a night out, but they for sure ain’t Gucci. Luxury brands get away with high prices because customers perceive them as high-value, glamorous, and having premium quality.
In this article, I’ll walk you through the mysteries of customer perceived value—what it is, why it’s important, what creates higher perceived value, and how you can do it, too.
What is customer perceived value and why it matters
First of all, what does customer perceived value even mean?
Oh, it means everything. It’s what customers get out of your product. If you ask Investopedia, here’s how they describe customer perceived value:
“perceived value is the customers’ evaluation of the merits of a product or service, and its ability to meet their needs and expectations, especially in comparison with its peers.”
And here’s the formula for customer perceived value, if you’re more into math:
Customer Perceived Value = Total Perceived Benefits – Total Perceived Costs
The formula suggests perceived value is pros outweighing the cons. Pretty simple, right?
So if you want your customers to come back, you need to make sure they get value out of their experience with you. In other words, it’s called value pricing.
The key to successful value pricing is to match the product with the consumer’s perception of value. I’ve personally bought a few items that I know won’t last me long, but knowing that I’ll only use them once or twice made me value the low prices. But, when I’m on a hunt for items that I hope to use for years, I’ll be less scrupulous when it comes to price.
3 types of benefits for improving customer perceived value
There’s more to customer perceived value than pricing. Some people value sustainable products, some go for brands that donate part of their income to charity, and so on.
There are three types of benefits you need to take into account when figuring out how to provide high perceived value to your customers.
1. Physical benefits
This is the practicality of a product. Let’s examine this handy All-Over Print Duffle Bag. It’s practical, comfortable, and lightweight—making it easy to carry your gym clothes and accessories. The inside pockets will keep your goodies safe and sound when you’re on the go.
2. Logical benefits
Logical benefits are somewhat similar to physical benefits; however, the difference is that physical benefits provide actual physical value, while logical benefits focus more on “yeah, this sounds reasonable” type of characteristics.
The logical benefits for the All-Over Print Duffle Bag would be breathability (which is a must-have for storing gym clothes) and high quality, making the product last longer.
3. Emotional benefits
These are the benefits that make your customers come back for more. For the duffle bag, the emotional value is that it’s customized. For example, imagine the pride and joy of using a premium product—that definitely makes the customer perceived value skyrocket.
Custom products are particularly trendy right now, and customization is a great vehicle for emotional benefit. The younger generations especially value custom products—rare finds they can’t find in every other fast fashion store. So when you’re thinking of ways to add that extra perceived value to your store, remember to keep personalization on top of your priority list.
Now that you know a thing or two about perceived value and its importance, it’s time to explore some of the key things that could help you improve customer perceived value and bring in more customers.
Audience—choose it wisely
There’s nothing more cringy than targeting the wrong audience. From advertising feminine hygiene products to men, to promoting beef burgers to vegans, it can go downhill real quick. Thorough market research and knowing your audience is what will help you drive sales.
Know your customers’ value perception
Picture yourself lying on the beach on a tropical island. There are gorgeous birds flying about, palm trees everywhere, and the sunsets are unlike anything you’ve ever seen.
If you’re a city kid like me, this might sound like total bliss. However, the perceived value of this paradise island isn’t just the views and wildlife. The value lies in what we associate it with: peace, quiet, and relaxation.
So be smart about your marketing: study your audience, dig deep, and find out what’s the true perceived value in your products.
Don’t try to please everyone
There are endless options for almost everything on the market: clothing brands, makeup companies, bakeries, you name it! The abundance doesn’t mean you should stay benched—just because somebody else sells t-shirts doesn’t mean you shouldn’t.
However, you need to be as specific as possible when targeting your audience instead of trying to please everyone; it’s simply impossible.
Let’s take a look at Rains—a Danish company creating stylish waterproof apparel, bags, and accessories.
Rains’ target market is people who’re looking for high-end raincoats they can display on their rack along with the rest of the jackets they’re proud of. These high-quality raincoats not only protect you from the rain and wind but also serve as a great fashion item. However, fashionable rainwear is not a go-to for all.
Money-conscious consumers, or those who simply don’t need serious rain protection, would most likely go for an umbrella or even a plastic raincoat poncho that can be crumpled up and put away when not needed.
Rains has their own specific niche, and they don’t compromise for the sake of selling to everyone. And neither should you.
There will always be people who won’t like what you’re doing, and that’s okay. It’s important to rethink your audience: you won’t be able to please everyone, especially the saving kind.
How you can increase customer perceived value
There are plenty of things you can do to increase customer perceived value. In this section, I’ll give you a brief overview of how to go about it.
Remember it’s not always all about the product
Even though offering quality products is important, keep in mind that it’s not just the product that turns online shoppers into return customers. Consumers also pay for convenience—they want the best possible product for the least amount of money, and they want it to be delivered yesterday.
That brings us to three variables:
Product is pretty straightforward: people want quality products.
Price is something we’ve already touched upon in this article—the higher the perceived value of a product, the higher you can price your products.
Now, convenience is something that needs special attention. Always try to do your best to make the customer’s interaction with your business as easy as possible.
What that means is giving your customers all they’re looking for on a silver platter, including clear information on why your product is a great choice for them. Consumers don’t want to spend time researching, so give them the full package—all they need to know about the product in one place.
The easier it is for the customers to navigate your store, the more likely they are to come back. More return customers mean more sales and better brand recognition. And better brand recognition means even more sales.
Keep in mind that customers will always compare your product, your brand, and your convenience with your competitors. Even if they’re not doing full-on research, they’re unconsciously making the comparison: it’s an automatic process.
Work on your brand
Seriously. How else will consumers recognize you and know you’re that badass company that delivers the value they’re looking for?
To check out how other companies deliver value, as an example, let’s look at Starbucks—the masters of convenience. This is their mission statement:
To inspire and nurture the human spirit—one person, one cup and one neighborhood at a time.
And they’ve successfully integrated this mindset in their value section as well:
There are different sensory words: warmth, belonging, courage, growth… They’re also giving off a nice, calm vibe with “being present” and “connecting”, while at the same time remaining professional and accountable.
As an online store owner, pay attention to your online presence and the vibe your website gives off to its visitors. Start with the easy things, like creating a nice, thoughtful “about us” page with your brand story, and letting your customers know what your values are.
Even though Starbucks has grown into a massive company, it also started small. So you don’t need a large team of professionals working on your branding day and night—you can start with small, yet significant steps.
Rethink your price tag
Sometimes, especially for new store owners, it can feel overwhelming to find out the right price for their products. And when it comes to setting high prices, it for sure can cause a bit of stress. What if nobody buys my products for this price? What if I have to lower my prices to get even one sale? Will it reflect badly on my brand?
Worry not—experimenting with pricing is completely normal. When trying to figure out the price tags, consider round numbers.
Generally, there are two approaches to pricing—using rounded or non-rounded prices:
- Non-rounded prices use decimals, like $12.99 or $3.75. Traditionally, they’re used to give the buyer the illusion of affordability.
- With rounded prices, there’s no .99 or .75: it’s either a whole number (no decimal) or a number with .00 as the decimal. The rounded price looks neater and is associated with the feeling of luxury.
See how Louis Vuitton prices their products—they’ve chosen to add a separator for cents, but they never use them
Or take Chanel—they also opt for rounded prices, but instead of adding the decimal point, Chanel keeps it simple and clean.
Having a rounded price, no matter if it ends with an odd or even number, whether it has a decimal point or not, makes the product catalog look cleaner and smoother than one that’s loaded with .99’s.
So when you’re revisiting your pricing page, think about whether you want your products to feel more luxurious or more affordable, and don’t fear a higher price—if you’ve created high perceived value for your audience, no price should hold them back from making a purchase.
Aim high—there’s enough space at the top
If you have doubts about upping your ante, think back to the ripped Gucci tights. If someone is willing to pay $190 for a wild night out look, they’ll definitely pay good money for a premium t-shirt, a mug, or even a keychain! The perceived value is all about the vibe, rather than the product itself.
It’s your mission as an online seller to build the price perception of your products, so creating that value for customers should be on top of your priority list. Even the big luxury brands used to be small, showing us you have to start somewhere and probably rip a lot of tights on your way to the top.
If you’d like to get some more hands-on tips, head over to this blog article on Marketing Expensive Products So They Look Like a Steal.